Japan: CBRE Global Investors facilities sale of JPY140B Assets deal

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Leading real estate investment manager, CBRE Global Investors, recently completed a sales deal of JPY 140.4 billion worth of assets belonging to a Japanese logistics portfolio. The sale ended a three months cycle of disposals of about 169 industrial properties. 

cbreCBRE GI achieved a 33% profit over the amount it spent to acquire the property in 2016. According to a statement released by this Los Angeles-based real estate investment management firm, the piecemeal sales deal was made on behalf of an investor consortium that included funds from the firm’s Asia Value Partners IV. 

The rise in capital values in Japan has triggered a chain of investments made by international investors seeking to take advantage of the changing market landscape. As a result, some notable international investment firms such as Blackstone and LaSalle Investment Management have similarly rushed to invest in Japan’s warehouse sector. 

Block-by-Block Sales Strategy

 The portfolio had multiple properties which were leased to Mitsubishi Fuso Truck and Bus Corporation. However, these properties were sold to different individual buyers who Unified Industrial managed. Unified Industrial is a specialist real estate firm that focuses on logistics and commercial assets in Japan’s and China’s real estate industries. 

These details of the Japanese logistics portfolio composition were released by a source that was privy to the transactions. However, the Unified Industrial representative failed to give any information about the deal to the general public. 

However, CBRE GI released a statement indicating how it managed to achieve an exit cap rate of 5.2% on these transactions. This was equivalent to 200 basis points below the 7.2% yield that was established when the firm acquired the properties in 2016 at the cost of JPY 105.1 million. This translates to JPY 25,000 per square foot when the cost of the properties’ disposal is calculated on the basis of a unit area. 

 Strengthened Lease Profile

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Tetsuya Fujita, Head of CBRE GI in Japan

The portfolio’s leasing profile improved as the firm credited its asset management approach. This improvement was helpful in the disposal of the portfolio. According to Tetsuya Fujita, who heads CBRE GI in Japan, the company had actively pursued a strategic approach that involved property improvements and significant lease extension. As a result, the portfolio’s quality and leasing profile were strengthened. 

According to Mr. Fujita, the team working at CBRE GI resorted to leasing extension and covenant improvement with the goal of improving the performance of the portfolio. This move triggered interest among institutional investors and wealthy individuals who purchased some of the properties in the portfolio. 

More Opportunities for CBRE GI in Japan

As the real estate in Japan continues to grow and expand, CBRE GI is planning to take advantage of this growth. The company disposed of the portfolio belonging to Mitsubishi Fuso Company. Therefore, it is seeking to acquire more portfolios from different business entities in Japan. 

The company is focusing its resources towards the acquisition of fresh opportunities in the vast Japanese real estate industry. It is banking on its 50 years of experience in the real estate management sector to create a competitive advantage in the market. They are hoping to convince new clients that they can manage and operate their assets to maximize returns and guarantee value improvement. 

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Adrian Baker, President – CBRE APAC Real Estate Division and CIO – APAC Direct Real Estate Strategies

The chief executive officer in charge of CBRE GI’s Asia Pacific operations, Adrian Baker, noted that their focus is on Japan logistics. He also revealed that they are deploying capital to each opportunity to create defensive and core assets using value-addition and development initiatives. These incentives are meant to woo potential clients and businesses to work with the company and therefore increase its market size in the region. 

 Strong Competition

The company’s success is also dependent on how well it will compete with other companies. However, the competing firms have been investing heavily in logistics assets in Japan. This means that CBRE GI has to outwit the competitors by diversifying their investments and offering better incentives to attract new clients. 

One notable firm that has invested in logistics assets in Japan is LaSalle Investment Management. This firm has set aside JPY 61 billion as a commitment fee after it launched its property fund that targeted core logistics assets in Japan’s real estate industry. Since its inception in November last year, LaSalle has been one of the biggest competitors for CBRE GI. 

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Blackstone Company – a major competitor to CBRE GI for industrial space.

Similarly, Blackstone Company which was founded in July 2019 and has since been an emerging competitor to CBRE GI. The company has already grabbed a considerable portion of the warehouse industry in Japan by buying warehouse portfolios. Blackstone has so far invested JPY 100 million in a warehouse portfolio in this land of the rising sun. 

The Pan-APAC logistics group has also established itself in Japan. This firm has invested JPY 70 billion in the logistics asset industry in Japan. Therefore, CBRE GI has expanded its market share by investing in China to counter the growing competition from these firms. It has invested RMB 5.5 million worth of assets in China through the funds under the CBRE Logos China Club. However, this fund has been transferred to the Logos Property unit in ARA Management. The transfer was done three months ago. 

CBRE GI has vast regional and global programs that offer direct and indirect private real estate investment opportunities. It has also diversified its investments to include investment in private infrastructures, infrastructure securities, private equity, and real estate securities. 

This diversification of investment has helped the company remain on top of the real estate industry in Japan despite the stiff competition from multiple firms. It is projected that the company will remain afloat for a long time since the real estate market in Japan is rapidly growing.

To find out more about CBRE GL, click here. 

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