AXA, Sumitomo agree first deals for Tokyo office fund

The French and Japanese subsidiaries have completed and agreed ¥10 billion of mid-sized office deals to seed their jointly-managed Tokyo Office Property Fund.

AXA Real Estate Investment Managers (AXA RE) and Sumitomo Mitsui Trust Real Estate Investment Management (SMTRIEM) have agreed a brace of deals for their joint venture Tokyo Office Property Fund valued at ¥10 billion (€83 million; $106.5 million).

The partners announced today they completed the acquisition of Shinjuku Sanchome, a 49,000 square foot office in the central Shinjuku ward of the city and had agreed the further purchase of another office in Chuo-Ku, another ward of the city, in a transaction intended to close in the coming months.

AXA RE, the real estate investment management arm of French insurer AXA, said the Shinjuku investment met the fund’s investment strategy of buying mid-sized offices with a core profile in the five central wards of Tokyo – Chiyoda, Chuo, Minato, Shinjuku and Shibuya – and four adjacent wards – Shinagawa, Koto, Bunkyo and Toshima.

The fund was set up to make investments in offices of between ¥3 billion and ¥10 billion. AXA RE and SMTRIEM, a subsidiary of Sumitomo Mitsui Trust Bank, held a first closing for the vehicle last September, raising ¥10 billion of equity from European, Asian and Japanese institutional investors. The closing came almost three years after the partners began working on a viable joint venture. According to AXA RE’s head of Japan Core Fund, Hidetoshi Ono, a second closing is anticipated “later in the year”.

He said:  “The acquisition of Shinjuku Sanchome is the perfect example of the type of property that this fund will seek to acquire to allow investors to build up an allocation of core and core-plus mid-size Tokyo office properties, at what we believe is a very opportune time in the cycle.”

The closed-ended fund is expected to run for five years and generate a return of more than 10 percent IRR from investments. It has a leverage cap of 50 percent loan to value.