Aviva, Secured complete debut buy for hybrid vehicle

The joint venture behind one of Asia’s rare hybrid investment vehicles has put the first tranche of its capital to work acquiring an office-led property in the Tokyo ward of Meguru-ku.

Aviva Investors and Secured Capital have completed the maiden investment for the Tokyo Recovery Fund, their hybrid blind-pool club fund.

The joint venture announced today it had purchased Meguro Place Tower in Meguru-ku, one of the 23 special wards of Tokyo. The property contains 12 floors of office space, three floors of retail and is fully let to 16 tenants, predominantly comprising small to medium-sized businesses.

The JV did not disclose a purchase price, however PERE understands it was more than $45 million.

The acquisition was the first made by the JV on behalf of its hybrid vehicle which borrows in structure elements from both traditional blind pool commingled funds and non-discretionary investment clubs – the latter of which has become increasingly popular with certain institutional investors.

In November the JV held a first closing of $122 million of equity for the Tokyo Recovery Fund thanks to equity commitments from Aviva Investors’ parent, London-based insurer Aviva and Dutch pension fund manager, PGGM Investments. A further equity raising for the vehicle is understood to be close, possibly before the summer.

The fund is expected to run for up to 18 months and generate core-plus style returns of between 10 percent and 12 percent from its investments.

Ian Hally, chief executive officer of Asia Pacific real estate and portfolio manager of the fund at Aviva Investors, described Meguro Place Tower as “highly sought-after” and an “obvious choice for the fund”.

He said: “Meguro Place Tower is an obvious choice for the Fund due to Tokyo’s on-going recovery of its commercial real estate sector and economy. In addition, pricing is currently very attractive compared to historic levels. As such, we are confident of achieving our aim of delivering a stabilised distribution yield with upside in capital value.”

Naoya Nakata, managing director at Secured Capital, said market conditions in Tokyo at present meant there were “significant gains” possible from making office investments in Tokyo’s central wards, reiterating Hally’s assessment of Japan’s property sector as being “under-valued”.