Hines Buys Central Tokyo Office Building From Mitsubishi Estate-SMFL JV

A Mitsubishi Estate joint venture completed Zenith Minami Shinjuku in December

Hines has acquired an office building near central Tokyo’s bustling Shinjuku commercial hub as the US developer continues to expand in Japan.

“Proud to announce our Hines Japan team has acquired the newly-built, 14-story Zenith Minami Shinjuku office building in Yoyogi – a special addition to our growing and diverse portfolio of residential, logistics and office sectors across the country,” Hines chief executive for Asia Pacific Ray Lawler said in a LinkedIn post on Wednesday.

While Hines did not disclose the vendor, a joint venture between Japanese property giant Mitsubishi Estate and Sumitomo Mitsui Finance and Leasing Co (SMFL) completed the 7,043 square metre property in northern Shibuya ward in December, according to construction database Kenetsu Databank.

The Tokyo acquisition by Hines, which had $1.4 billion in assets under management in Japan at the end of last year, comes as global real estate investors focus more of their attention on Asia’s second-largest economy, with TPG saying in February that it had raised $398 million for a Japan value-add fund. Ares Management announced in December that it would also enter the Japan market, with Blackstone having noted in August last year that it is looking to replenish its property portfolio in the country.

Prime Location

Hines has taken possession of Zenith Minami Shinjuku after having previously agreed to acquire the project from Mitsubishi Estate and SMFL on a forward commitment basis, according to market sources who spoke with Mingtiandi. Financial details of the acquisition were not disclosed.

The deal involved the US developer and fund manager taking responsibility for leasing the property post-acquisition, with tenants including Daiwa House-owned architecture design firm Dice Next having already moved into Zenith Minami Shinjuku.

Hines Asia Pacific CEO Ray Lawler

Hines’ latest addition to its Japan portfolio is located in Yoyogi, a neighbourhood just south of Shinjuku which is home to the Meiji Shrine and one of Tokyo’s largest parks. The area also hosts Tokyo’s fifth tallest tower, the 27-storey NTT Docomo Yoyogi Building and Yoyogi National Gymnasium.

The property is located within a 10-minute walk from multiple transit stations, including Yoyogi station and Shinjuku station, with the latter connecting to Japan Railway’s Chuo line, an east-west artery connecting central Tokyo to neighbouring prefectures.

Shai Greenberg, senior director and co-lead international for Japan capital markets at JLL, noted that the property is poised to benefit from its proximity to Tokyo’s busiest train routes as well as the appeal of a new asset in an area dominated by older offices.

“This building, while on the fringe of what would be considered the Shinjuku market, has great access to Chuo line which boasts over 2 million daily riders and provides convenient access to workers commuting from both Chiba and Tama region,” said Greenberg. “This would make it an attractive option for tenants looking to relocate from one of Shinjuku’s ageing buildings to a new building in a market that has not seen a great deal of new supply.”

The supply of grade A office space in Shinjuku expanded by less than five percent last year, giving it the lowest level of new supply of any of Tokyo’s major commercial hubs, according to research from Colliers.

Three straight months of rising occupancy reduced average office vacancy in Shinjuku to 4.7 percent at the end of February, down by 1.1 percentage points from the same month last year and marking a 37-month low, according to data from office brokerage Miki Shoji.

Hines had chosen office for its first acquisition in Japan, acquiring New Stage Yokohama in Tokyo’s southern neighbour on behalf of its flagship pan-Asian fund in 2021, according to a statement at the time.

The company jumped into Japan’s multi-family market the following year with a purchase of a portfolio of 11 apartment buildings in Tokyo, Nagoya and Fukuoka, before adding to that total with an acquisition of another five Japanese residential assets last year.

Earlier this month, Hines sold a pair of Nagoya warehouses to Hong Kong’s PAG for a reported $429 million, with the larger of the two sheds having been completed by the US firm in February.

Office Investor

Hines deal comes around one month after SMFL made the news with a deal to acquire ARA Asset Management’s private fund management business from ESR for $270 million. In 2020, the Japanese firm had worked with ARA to take private Tokyo-listed property investment firm Kenedix in a $1.3 billion deal.

In March of last year, ARA sold a half stake in Lazada One, an office project in Singapore to a fund invested by SMFL for $269.3 million.

Back in Japan, a joint venture involving a subsidiary of SMFL in February received government approval to develop a two-building complex in Yokohama. SMFL Mirai Partners teamed up with local developer Ken Corporation, general contractor Kajima and educational institution Iwasaki Gakuen to develop Linkage Terrace, a 155,160 square metre complex incorporating office, hotel and retail facilities.

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