GIC buys Tokyo’s PCP office for ¥170 billion

Singaporean sovereign wealth fund GIC has acquired the office component of Tokyo’s landmark Pacific Century Place from Secured Capital.

Singapore’s sovereign wealth fund, GIC Private, has officially announced the purchase of one of Tokyo’s most expensive office buildings, Pacific Century Place.

No price was disclosed but the building was understood to have been sold for approximately ¥170 billion (€1.24 billion; $1.59 billion). According to PERE sources, the deal reflects a yield of around 2.5 percent.

The news that GIC was in final negotiations to purchase the landmark building in the city’s upmarket Marunouchi ward from Secured Capital, the real estate arm of alternative-asset manager PAG, was first reported late August.

GIC is understood to have beaten bidders including New York-based investment bank Goldman Sachs and Tokyo-based property company Mori Trust.

It means the 418,070 square feet, 32-storey office building has been bought by a group with a core investment strategy for the first time since it was developed at the turn of the century. Secured Capital and previous owner, the now-collapsed Japanese private equity real estate firm KK daVinci, as well as its developer Richard Li, held employed higher risk and return strategies.

“As a long-term value investor, GIC believes Pacific Century Place Marunouchi gives us the combination of stable income and potential for capital appreciation over the long term,” Lee Kok Sun, co-head of Asia at GIC Real Estate said in a statement. “The attractions of the property are its prime location, superior building quality, and quality tenants.” Sun further added that the investment demonstrates the firm’s confidence in the Tokyo market over the long run.

The complex also houses the Four Seasons Hotel and several retail outlets but these components were not part of the sale.

Tokyo-based Secured Capital has been in possession of the Pacific Century Place since 2009, when it bought the site from its creditors for ¥140 billion. “PCP is a landmark asset and we have been uniquely positioned in this market to manage and realize its value. The investment is representative of our emphasis on quality assets in the very attractive Tokyo real estate market where we can take a longer term view to unlocking value,” said J-P Toppino, managing partner of PAG Real Estate.

Property broker Jones Lang LaSalle advised Secured Capital on the sale. Akihiko Mizuno, the firm’s head of capital markets said that the sale reflected the positive view of investors on future rent increases in the Tokyo grade A office market led by the recovery of the Japanese economy.