GE Capital Real Estate and Canada Pension Plan Investment Board (CPPIB) have announced the launch of a joint venture to target investments in mid-size, Grade A and B offices in key central business district sub-markets in Tokyo, according to a joint statement.
The Tokyo Office Venture will focus primarily on core-plus and value-add opportunities. GE and CPPIB will initially invest a combined equity amount of ¥40 billion (€308 million; $403 million) on a 51:49 basis, respectively.
This will be CPPIB’s second joint venture in Japan, following its $1.132 billion JV with Global Logistic Properties.
Neither firm would comment on the targeted leverage of this JV, but PERE understands that its total investment capacity is around $1.2 billion.
The joint venture will be solely managed by the Japan-based GE Capital Real Estate team already on the ground, according to a GE Capital spokesman. GE’s team has been in Japan since 1998 and has acquired over US$6.9 billion of office assets in that time.
“By combining GE Capital’s deep domain expertise in Japan with CPPIB’s global investment reach, this co-investment program aims to bring two large real estate players together to tap the current opportunities of the office market in Tokyo,” François Trausch, president of GE Capital Real Estate Asia Pacific, said in the statement.
“This opportunity provides us with an attractive entry point to the Tokyo office sector and supports our strategy to expand our real estate portfolio in Asia,” Graeme Eadie, CPPIB’s senior vice president and head of real estate investments, said in the statement.
A CPPIB spokeswoman also told PERE that the financial crisis has had a “disproportionate impact on the Tokyo office market,” and the firm’s research suggests that the cycle has been bottoming out over the past few months. Thus, the firm believes Tokyo’s office market “offers attractive pricing dynamics, deal access and potential for outperformance.”
Establishing a joint venture is expected to give both firms greater flexibility to invest directly in the Japan market, versus co-investing on a property-by-property basis which would require approvals from both sides before investments were made.
Apart from Japan, CPPIB has also invested in Hong Kong, China and Australia in Asia. It has a total of C$172.6 billion (€131 billion; $172 million) under management, C$19.2 billion of which is in real estate globally.
GE Capital Real Estate has been in Asia since 1997, and currently has about $7.7 billion in assets in Japan, Korea, Australia and Hong Kong, according to the firm.