The manager of Keppel REIT has announced that the REIT will be acquiring an effective interest of 98.47% in Ginza 2-chome, a freehold boutique office building in Tokyo, Japan.
On Oct 28, KR Ginza TMK – TMK being a common structure adopted for investment in real estate under Japanese law – entered into a trust beneficial interest purchase and sale agreement with Tokyu REIT to acquire the interest of the building.
The total purchase consideration for the 100.0% stake is 8.97 billion yen ($85.7 billion), making Keppel REIT’s consideration 8.83 billion yen for its 98.47% effective interest.
The remaining 1.53% effective interest in the property will be held by Keppel Capital Japan Limited (Keppel Capital Japan).
“This strategic acquisition of Ginza 2-chome in Tokyo marks Keppel REIT’s entry into Japan, the world’s third largest economy and Asia’s largest developed market. In line with our active portfolio management strategy, we believe this quality addition will strengthen our geographical and income diversification, provide greater stability and enhance Keppel REIT’s overall portfolio returns,” says Koh Wee Lih, CEO of the manager.
“In addition, the well-located freehold asset in Tokyo’s prime Ginza district will enhance the visibility of Keppel REIT in the Japanese market and pave the way for the REIT’s future expansion in the well-established and scalable investment grade office market in Japan,” he adds.
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The building comprises eight floors of office space and a retail unit on the ground floor. Completed in 2008, the building offers a total net lettable area (NLA) of 3,427.1 sqm.
The building is located in the Ginza district within the Chuo ward, one of Tokyo’s core three wards and home to major Japanese corporations, the Bank of Japan and the Tokyo Stock Exchange. It is also easily accessible via the Tokyo Metro.
When fully leased, the property is expected to bring a net property income (NPI) yield of approximately 3.1% and pro forma distribution per unit (DPU) accretion of 0.5%.
See also: CICT's manager proposes to acquire ION Orchard at $1.85 billion, subject to EGM
Keppel Capital Japan will be appointed as the local asset manager for the property.
The acquisition will be fully funded with yen-denominated borrowings. Following the acquisition, the REIT’s aggregate leverage will be approximately 39.0%. Its assets under management (AUM) will come in at around $9.0 billion across 12 properties in four countries.
The proportion of freehold assets within its portfolio will also increase by 0.6 percentage points to 30.7% by NLA assuming the acquisition was completed on Sept 30.
Units in Keppel REIT closed flat at 92 cents on Oct 28.
