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Mori Trust flips Meguro Gajoen to LaSalle JV

Mori Trust has sold the Meguro Gajoen complex in Tokyo to a joint venture led by LaSalle Investment Management within just six months of acquiring the asset from Lone Star Funds.  

A joint venture led by LaSalle Investment Management, the global real estate investment manager, has acquired the Meguro Gajoen office complex in central Tokyo from the Japanese property company Mori Trust for an undisclosed amount.

In a statement announcing the acquisition, LaSalle said that it has purchased the mixed-use complex through a joint venture with a global sovereign wealth fund. The Wall Street Journal has reported that LaSalle completed the purchase in partnership with China’s sovereign wealth fund, China Investment Corporation in a deal worth ¥140 billion (€1.04 billion; $1.18 billion).

This news comes less than six months after Mori Trust bought the complex from Dallas-based private equity real estate firm Lone Star Funds for ¥130 billion (€969 million; 1.09 billion), implying that this transaction has generated a quick profit for Mori Trust. One PERE source suggested that the company has been able to realize a profit of as much as $100 million from the sale.

LaSalle and Mori Trust declined to comment on the JV partner or the price.

CIC was understood to have been a bidder when the asset was put up for sale by Lone Star last year. As PERE revealed then, there was a prospect of CIC investing in the asset at a later stage should Mori Trust syndicate its investment. 

In LaSalle’s announcement, Mark Gabbay, co-head and chief investment officer for Asia Pacific at the firm, said: “LaSalle maintains a balanced investment strategy in Japan, investing across different asset types and risk profiles and Meguro Gajoen is an excellent addition to our core portfolio in Asia.”

The asset is spread over a 1,677,233 square feet, and comprises the Arco Tower office building, the Meguro Gajoen banquet hall and hotel, and the Arco Square retail properties. The complex is understood to be 99.7 percent occupied.

Nick Okumura, head of acquisitions for Japan at LaSalle Investment Management, said: “The market continues to be very active in core investing in Tokyo, but it has proved challenging for investors to get access to prime, core office real estate. Therefore we are extremely pleased to acquire Meguro Gajoen in the current environment.”

In the last one year, the Meguro Gajoen asset has attracted a lot of attention surrounding its ownership. Singapore’s sovereign wealth fund GIC Private, in April 2014, entered into exclusive negotiations to buy the complex but later withdrew its bid over concerns of inheriting litigation issues relating to the historical ownership of the land. 

A few months later, Mori Trust took over the property after beating bidders including other large institutions and investment managers. Whether the legal issues that deterred GIC are still relevant for Meguro Gajoen’s new owners, however, remains to be seen.