Mapletree Greater China Commercial Trust buys 6 Japan properties for $753.4m

These are expected to contribute 11% and 12% to its portfolio valuation and NPI.

Mapletree Greater China Commercial Trust (MGCCT) bought a 98.47% interest in a portfolio of six freehold commercial real estate assets located in Tokyo, Yokohama, and Chiba from MJOF Pte. Ltd. 3 for a price of $753.4m (¥60.93b).

According to an announcement, the Japan Portfolio comprises six freehold office buildings with three in Tokyo (IXINAL Monzen-nakacho Building, Higashi-nihonbashi 1-chome Building, and TS Ikebukuro Building), ABAS Shin-Yokohama Building in Yokohama, and two in Chiba (SII Makuhari Building and Fujitsu Makuhari Building).

MGCCT said, “The office locations where the buildings are situated are well-established hubs with attractive micro-location characteristics. Situated close to busy train stations, public transportation nodes and major arterial roads, the properties provide good connectivity and are cost efficient office locations for our tenants.”

Also read: MGCCT includes Japan in investment mandate

The portfolio has an occupancy rate of 99.9%, a WALE of 5.8 years, and a tenant base of 21 tenants comprised of Seiko Instruments Inc, Fujitsu, Japan Information Processing Service, and PERSOL. “Each of these tenants provides income stability as the sole occupant of each respective property since the building’s completion. Some of the leases in the multi-tenanted buildings expiring in FY18/19 and FY19/20 are currently under-rented and may offer upside potential with positive rental reversion,” the trust said.

MGCCT CEO Cindy Chow noted that Japan provides attractive commercial real estate acquisition opportunities, with largely freehold land tenure and at a relatively higher yield spread against the local cost of funds, attributes which are not presently available in MGCCT’s existing markets. “With an active and scalable investment grade real estate market, we believe that the entry into Japan will provide a wider pool of acquisition opportunities,” she said.

The portfolio value implies a net property income (NPI) yield of 4.8% and a discount of approximately 1% and 1.1% to previous independent valuations.

MGCCT noted that the proposed acquisition is expected to result in income diversification with contribution from a new geographical location and a wider pool of tenant base, which will reduce the reliance of income contribution from any single property. “MGCCT’s asset size will increase from $6.2b to $7b, whilst the Japan portfolio will contribute to 11% and 12% of the enlarged portfolio’s valuation and NPI respectively.”

The Manager intends to finance the costs through a combination of debt and the proceeds from an equity fundraising.