TOKYO—Global Logistic Properties Ltd., majority owned by Singapore's sovereign-wealth fund, is in final negotiations to acquire a Japanese portfolio of real estate that could fetch up to ¥140 billion ($1.7 billion), making it the biggest property deal in Japan in two years, according to people familiar with the matter.
Private-equity firm Blackstone Group's real-estate arm is also in final talks and is in close competition with GLP in a bid to acquire the assets, according to the people. LaSalle Investment Management is selling a portfolio of more than 20 industrial properties in Japan used for distribution and warehouses by companies.
The acquisition would mark the single biggest foreign investment in Japan since the country's devastating natural disasters in March. It would also be the biggest single property investment since real-estate fund Secured Capital's purchase of the Pacific Century Place building in Tokyo in 2009 for ¥140 billion, according to Nomura Securities.
Given that yields, defined as a property's expected annual net income as a percentage of its capital value, are paltry elsewhere in Asia at the moment, Japanese real estate remains an attractive destination for foreign capital, particularly given low borrowing costs. The yield on residential properties in Tokyo is 4.5% to 5%, compared with less than 3% in Hong Kong.
In the first half of 2010, Tokyo led all cities world-wide with real-estate transaction volume exceeding $10 billion, according to Real Capital Analytics. Real-estate investment trusts and foreign investors have been active participants in the market, confident that prices have finally bottomed out.
Following the earthquake, investors have marveled at the resilience of Japanese building construction and the limited damage to the vast majority of properties. Many foreign investors see now as an ideal time to invest in Japanese real estate, particularly as prices on some older, lower-grade buildings have declined following the quake.
"Japanese banks are eager to lend us the money we need to make acquisitions, particularly after the quake," said one real-estate fund manager. "They want to ensure that foreign capital stays in the mix."
Global Logistic Properties, which is majority owned by the Government of Singapore Investment Corp., a sovereign-wealth fund, owns 69 properties in Japan valued at $6.18 billion. Japan represents its single biggest investment in terms of valuation. "In Japan, we remain bullish on the country's outlook despite the recent tragic earthquake," Jeffrey Schwartz, GLP's deputy chairman, said in a statement in late May.
GIC Real Estate Pte. Ltd, the real-estate investment arm of the GIC, has also been an active player in Japan's property market for years.
But not all observers have a rosy outlook about the market, particularly with regard to the logistics sector: "Although we expect increased demand for logistics centers for temporary use while reconstruction continues, overall demand is expected to decline as tenants adopt a wait-and-see approach towards expansion on the back of the expected decline in production," said a recent report by Jones Lang LaSalle, the real-estate services firm.
By MARIKO SANCHANTA And ALISON TUDOR-ACKROYD
Source: http://online.wsj.com
Private-equity firm Blackstone Group's real-estate arm is also in final talks and is in close competition with GLP in a bid to acquire the assets, according to the people. LaSalle Investment Management is selling a portfolio of more than 20 industrial properties in Japan used for distribution and warehouses by companies.
The acquisition would mark the single biggest foreign investment in Japan since the country's devastating natural disasters in March. It would also be the biggest single property investment since real-estate fund Secured Capital's purchase of the Pacific Century Place building in Tokyo in 2009 for ¥140 billion, according to Nomura Securities.
Given that yields, defined as a property's expected annual net income as a percentage of its capital value, are paltry elsewhere in Asia at the moment, Japanese real estate remains an attractive destination for foreign capital, particularly given low borrowing costs. The yield on residential properties in Tokyo is 4.5% to 5%, compared with less than 3% in Hong Kong.
In the first half of 2010, Tokyo led all cities world-wide with real-estate transaction volume exceeding $10 billion, according to Real Capital Analytics. Real-estate investment trusts and foreign investors have been active participants in the market, confident that prices have finally bottomed out.
Following the earthquake, investors have marveled at the resilience of Japanese building construction and the limited damage to the vast majority of properties. Many foreign investors see now as an ideal time to invest in Japanese real estate, particularly as prices on some older, lower-grade buildings have declined following the quake.
"Japanese banks are eager to lend us the money we need to make acquisitions, particularly after the quake," said one real-estate fund manager. "They want to ensure that foreign capital stays in the mix."
Global Logistic Properties, which is majority owned by the Government of Singapore Investment Corp., a sovereign-wealth fund, owns 69 properties in Japan valued at $6.18 billion. Japan represents its single biggest investment in terms of valuation. "In Japan, we remain bullish on the country's outlook despite the recent tragic earthquake," Jeffrey Schwartz, GLP's deputy chairman, said in a statement in late May.
GIC Real Estate Pte. Ltd, the real-estate investment arm of the GIC, has also been an active player in Japan's property market for years.
But not all observers have a rosy outlook about the market, particularly with regard to the logistics sector: "Although we expect increased demand for logistics centers for temporary use while reconstruction continues, overall demand is expected to decline as tenants adopt a wait-and-see approach towards expansion on the back of the expected decline in production," said a recent report by Jones Lang LaSalle, the real-estate services firm.
By MARIKO SANCHANTA And ALISON TUDOR-ACKROYD
Source: http://online.wsj.com
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