ASIA NEWS: Secured plays leasing game

The Tokyo firm hopes to turn the largest Japanese single-asset deal, Pacific Century Place, into a perfect leasing play. PERE Magazine, February issue

It is little wonder Secured Capital Japan’s (SCJ) acquisition of Tokyo monolith, Pacific Century Place (PCP), in December attracted so much attention. The reported investment of ¥140 billion (€1.05 billion; $1.5 billion) in the 32-storey Marunouchi office block carries with it heaps of significance.

So naturally all eyes will be on how Secured fares on the transaction, which it completed on behalf of its latest real estate fund, the $525 million SCJREP IV and unnamed institutional investors.

JP Toppino, president of Secured, acknowledged as much when approached by PERE, but he said the firm had bought the building at a cap rate of about 4.5 percent and was buying at an ideal point in the leasing cycle.

Ironically, the building’s previous owner Osamu Kaneko’s KK daVinci, also considered its record-breaking outlay of ¥200 billion in 2006 a decent leasing market play. Unfortunately for Japan’s largest private equity real estate firm, it purchased the building at a yield reputed to be about 2 percent, just as rents began to fall and Tokyo’s vacancy level grew.

Toppino said Marunouchi’s vacancy level is currently less than 5 percent, while Japanese property services firms have tracked wider Tokyo to nearer 10 percent vacant, the same as PCP’s own vacancy level.

“This investment is clearly not without risk,” said Toppino. But he added: “If we are not at the bottom of the market we are pretty close. Realistically I see rents stop falling in this first quarter and I believe acquiring core Marunouchi real estate at this point in the cycle is a once in several decades opportunity.”