CapitaLand Mall Asia, a wholly-owned unit of Singapore-based CapitaLand Limited, has invested in the Greater Tokyo market with the acquisition of four office and retail properties for JPY49.7bn (S$620.1m)
The Singapore-listed property investment company, owned in a large part by Singaporean national wealth fund Temasek Holdings Private Limited, has significantly expanded its footprint through the deal.
The purchase will bring the group’s total assets in Japan to S$2.5bn, up nearly 40% from the S$1.7bn before the transaction.
Temasek owns 40% of CapitaLand Limited, according to the company’s shareholder registry. Temasek is an equity-oriented investment company with S$242bn under management, whose sole shareholder is the Singapore Ministry of Finance.
The transaction will produce an estimated entry property yield of 4.1%, and could potentially achieve a yield of 4.5% to 4.8% in the next two to three years, according to a CapitaLand presentation describing the acquisition.
The company projects an accretive return on equity of more than 10% at property level from the purchase, which was financed with internal funds and Japanese yen-denominated debt.
The presentation indicates that the attractiveness of the Greater Tokyo region, which encompasses Tokyo proper and the Yokohama area, is based on its position as “the world’s most populous metropolis” according to Demographia’s World Urban Areas, which tracks population, corresponding land area and population density for urban areas with more than 500,000 people.
The acquisition deepens CapitaLand’s presence in Tokyo through assets with stable yields and recurring cash flow that will be immediately accretive to net income and provide a stable source of income as the company builds its portfolio in Japan. According to the Japan Real Estate Institute, vacancy in central Tokyo office space expected to stay below 5% through 2025.
Expanding in Greater Tokyo is a long-term business strategy for CapitaLand’s operation in Japan.
“We would like to focus in the Greater Tokyo region,” the company told IPE Real Estate.
“Currently we have properties across office, retail and serviced residences.”
CapitaLand declined to comment on the relative attractiveness of those sectors.
