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GreenOak eyes final closing for Japan fund

The New York-based private equity real estate firm is targeting a final closing of its first Japanese opportunity fund by the end of the summer.

GreenOak Real Estate, the private equity real estate firm launched by former heads of Morgan Stanley Real Estate Investing (MSREI), is expecting to hold a final closing for its first Japan opportunity real estate fund later this summer. The firm raised $200 million of equity last February for the GreenOak Real Estate Japan Fund and has since deployed about half of that. 
 
Many of the the firm's capital outlays have come over the past three quarters, according to a source with knowledge of the matter. He said GreenOak had acquired 10 offices buildings over that period for a total purchasing price of about $570 million, including debt.
 
The fund originally was launched in 2010, although the Tohoku earthquake one year later meant the firm was delayed in its effort to raise capital. With capital markets returning to more positive territory, GreenOak is said to be confident about reaching its target, which was originally $500 million but may be revised downward, PERE understands. GreenOak declined to comment on fundraising or specific deals when approached.
 
GreenOak’s Asia strategy is focused solely on Japan. Similar to other private equity real estate businesses operating in the country, its fund buys only offices in the central wards of Tokyo. The firm’s average deal size is understood to be between $20 million and $60 million.
 
GreenOak and its competitors have pegged their investment strategy on central Tokyo as its rental levels and capital values are widely believed to be bottoming out. Indeed, last year saw 3.75 million square feet of new office space hit the Tokyo market alone, an 8.1 percent increase year-on-year, according to Jones Lang LaSalle (JLL) research. Yet, with net take-up in the city reaching 3.3 million square feet – a 96% increase year-on-year and the highest amount since 2008, according to JLL – the market is looking less saturated.

That has underlined predictions of rental increases and subsequently increased values in the short to medium term. In the first quarter, for example, the capital value of Tokyo offices increased to $21,358 per square meter, which is a 0.8 percent increase quarter-on-quarter and a 3.6 percent increase year-on-year, according to JLL.

In 2010, three former Morgan Stanley professionals – Sonny Kalsi, John Carrafiell and Fred Schmidt – came together to set up GreenOak after resigning from the bank’s real estate investment arm between 2008 and 2010. The Japan fund is the second fund the firm launched, following the introduction of a US-focused fund, which closed with $300 million in equity in January 2012. This January, the firm began fundraising for its second US fund, which is targeting up to $500 million, PERE previously reported.