Private equity giant Blackstone agreed to buy a mixed-use commercial property complex in Tokyo for $2.6 billion, a deal it called the largest real estate investment by a foreign investor in Japan.
Located in downtown Tokyo, the 2.4 million-square-foot Tokyo Garden Terrace Kioicho has a reported 100% occupancy rate for its office space. The property also contains 135 high-end residences, a 250-room luxury hotel, conference and wedding venues, over 30 cafes and restaurants, and retail and service stores.
The deal announced Thursday by New York-based Blackstone and the seller, Seibu Holdings, comes as Japan’s Ministry of Foreign Affairs kicked off a campaign this year to attract foreign direct investment in Japan.
The ministry set a goal of achieving a total of 100 trillion yen in new foreign direct investment by 2030. That amounts to about $6.58 trillion — double the rate of investment based on foreign money that flowed into Japan from around the world in 2023, according to U.S. State Department figures.
Overseas investors have become more active in Japan this year, drawn by a cheap yen, low borrowing costs and strong performance of properties such as apartments, offices and hotels in metropolitan areas, according to the Japan Times, the country's largest daily English-language newspaper.
Japan has seen $25.7 billion in commercial real estate investment in the first nine months of this year, according to data from real estate firm JLL. That is up $20.1 billion in the same time frame last year.
Hotel, office demand drive trend
Hotel and office deals have been a big driver of that trend, according to JLL. In Tokyo, vacancy at top-tier office buildings, a group that includes properties such as Tokyo Garden Terrace Kioicho, hovers near 3%, and rents posted their third quarter of consecutive growth last quarter, according to JLL.
“Japan is entering a new era where companies are seeking further growth and selling assets through partnerships with partners rooted in the local market, such as Blackstone,” Daisuke Kitta, head of real estate for Blackstone Japan, said in a statement. “We will leverage our strong local team with deep knowledge and personal networks, as well as our global real estate platform, to support the long-term growth and success of this asset.”
Blackstone has built up a diverse portfolio of Japanese real estate, including hotels, rental housing, logistics facilities and, most recently, data centers.
Japan’s Ministry of Foreign Affairs has helped encourage Japanese firms to consider attracting new foreign investments.
Seibu announced in May a strategy to look at selling its entire real estate holdings to capture unrealized profits and reinvest the proceeds in new properties.
"Blackstone has not only valued this asset to the fullest extent, but has also made proposals that will contribute to the further growth and development of the asset,” Ryuichiro Nishiyama, president and chief operating officer of Seibu Holdings, said in a statement. “Going forward, our group companies will continue to be involved in the operation of this asset, including by undertaking asset management and hotel operation services."
Seibu said it intends to use the Blackstone proceeds to fund redevelopments in downtown areas, develop resorts, and acquire new properties.