Japan’s Q2 Real Estate Transaction Value Rises 34% on Pricier Properties

Favourable market conditions led REITs to replace assets

The total value of property transactions in Japan rose by 34% year-on-year in the April to June quarter, and the largest deal was the sale of Aoyama building from U.S.-based GreenOak Real Estate to Gaw Capital Partners in Hong Kong.

GreenOak Real Estate acquired the Aoyama building in central Tokyo for more than 46 billion yen (US$430 million) in 2015 and sold it to Gaw Capital Partners for 84 billion yen this year after large-scale renovations and tenant replacements. The capitalisation rate, or the rate of return, is approximately 3%, according to data compiled by Nikkei Real Estate Report.

A total of 764 billion yen worth of assets changed hands in the quarter, according to the data. While the year-on-year comparison showed a 34% gain, the second quarter’s performance was a 21% drop compared with the first three months of the year.

The number of transactions recorded between April and June 2019 was 358, broadly the same compared with the same period a year ago. Out of the 358 transactions during the three months, office buildings accounted for 37%, followed by hotels with 17% and logistics facilities with 16%. Asset replacements by REITs were active in the quarter, said the report.

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Among retail properties, those in urban areas were sold at higher prices while values for assets in sub-urban regions fell. Croesus Retail Trust, which acquired Croesus Shinsaibashi in Osaka for 9 billion yen six years ago, sold the retail asset to Sumitomo Corporation for 20.8 billion yen in April this year. The price increase was 130%, equivalent to an annualised gain of 21.5%. However, suburban mall Mitsui Shopping Park Alpark was sold at below book value. Frontier REIT sold the mall for 3.8 million yen, almost 30% below the acquisition price, after holding the asset for six years.

In logistics, GLP Fukuoka facility’s 51% increase in price value was the most considerable mark-up for the sector. The asset was sold by GLP J-REIT at an annualised gain of 11.4%.

Top 10 Major Transactions of 10 Billion Yen or More

(reported during April to June 2019)