SilkRoad Property Partners on Monday announced the acquisition of six Greater Tokyo assets for JPY 19.5 billion ($150 million), marking the Singapore-based firm’s first investment in Japan.
The properties consist of an office building in central Tokyo and five multi-family assets in major commuter cities around the capital, SilkRoad said in a release. The assets were acquired for the $549 million SilkRoad Asia Value Partners II fund.
The purchases from multiple undisclosed sellers represent an expansion of SilkRoad’s value-add strategy beyond the firm’s core markets of Singapore, Hong Kong and mainland China.
“As a company, it has long been our aspiration to have an active presence in the second-largest real estate market in the world,” said SilkRoad CEO Peter Wittendorp. “These acquisitions are just a first, promising step. We are looking to do a lot more in Japan.”
Revamping Grade B Offices
The office block in central Tokyo is a nine-storey Grade B property with retail on the ground floor. The building is easily accessible to five subway stations that connect to four transit lines, SilkRoad said without revealing the precise location.
The firm plans to conduct a series of renovations to reposition the building into a Grade B+ or A asset, a strategy that yielded internal rates of return in the high teens for SilkRoad’s comparable Singapore investments even throughout the COVID-19 pandemic, the company said.
The multi-family portfolio comprises three existing buildings and two forward commitments with a total of 314 units. All are in major commuter cities surrounding central Tokyo and within a few minutes’ walk of the nearest subway stations.
“We are delighted to have acquired these deals successfully despite the challenges of the pandemic,” said Iris Mak, executive director and head of Japan at SilkRoad. “We believe this well-diversified portfolio would benefit from our value-add strategies and focus on ESG principles.”
SilkRoad Asia Value Partners II, which is in fact the third fund in the firm’s value-add series, reached a final closing of $549 million in capital commitments in late 2020, blowing past the company’s $500 million target. The milestone arrived after the COVID crisis led SilkRoad to extend the fundraising period for SAVP II, with the vehicle having reached a $377 million first closing in the fourth quarter of 2018.
Among the assets acquired for SAVP II are the Smile Centre industrial building in Hong Kong’s Fanling area, purchased for $41 million in February 2021, and the Hang Wai Industrial Centre in Tuen Mun, picked up for $167 million in October 2021.
In a bid to expand beyond its traditional value-add strategy, SilkRoad launched its first-ever core-plus Asia real estate fund, announcing a $144 million first closing in February 2022.
The open-ended core strategy aims to raise $400 million to invest in mature properties across Singapore, Hong Kong, Japan and China, with SilkRoad shaping its strategy around sectors benefiting from the post-pandemic recovery such as logistics, multi-family, senior living, retail and tech-driven assets.
Note: This article has been updated to show that SilkRoad announced a $144 million first closing for its Asia core-plus fund in February. An earlier version indicated a $144 billion first closing.