Tokyu to start flipping luxury condominiums

Majes Tower Roppongi 3

This month, Tokyu Land will start sales of condominium units in a 9 year old residential building in Roppongi. The company acquired the former Residia Tower Roppongi, a 27-storey rental-only tower, in 2014 and will soon start selling off the apartments individually as they become vacant.

The revamped building has been re-named ‘Majes Tower Roppongi’. It is across the street from The National Art Center, 200 meters from Tokyo Midtown and 600 meters from Roppongi Hills. Apartment prices will range from 60 ~ 200 million Yen (500,000 ~ 1.66 million USD), with an average price of around 1,630,000 Yen/sqm (1,260 USD/sq.qft).

A 47.88 sqm (515 sq.ft) studio apartment on the 8th floor is listed for 66,100,000 Yen, while a 117.14 sqm (1,260 sq.ft) 2-Bedroom apartment on the 6th floor is listed for 199,600,000 Yen.

Based on average rents, investor-buyers should expect gross yields the 2 ~ 3% range. Just 6 of the 83 apartments will be available for sale during the first round of sales this month. They will be ready for delivery to buyers from early 2016.

Because this was originally built as a rental building, it does not have floating floors (something commonly found in condominiums as a way to provide extra insulation and sound proofing, and allow for easier re-configurations of piping and layout). Ceiling heights are also a maximum of 2,450mm, which is average but a little lower than the 2,500 ~ 2,600mm found in luxury residences.

The 27-storey building was completed in February 2006. At the time of its sale to Tokyu in December 2014, 77 of the 83 apartments were leased to tenants. As the tenants gradually end their leases, the vacant apartments will be listed for sale. Tokyu are also planning to start sales on an existing low-rise apartment building in Motoazabu in 2016, and are aiming for annual revenues of approximately 10 billion Yen (83 million USD).

In late 2014, Advance Residence Investment Corporation sold five rental properties, including Residia Tower Roppongi and Motoazabu Place, for a total of 25.56 billion Yen. At the time, the assessed value of Residia Tower Roppongi (now Majes Tower Roppongi) was 5.79 billion Yen, and Motoazabu Place had an assessed value of 6.11 billion Yen.

Tokyu are not the only developers converting rental-only buildings into condominiums. Grosvenor and Mitsui have also converted high-end residential buildings in central Tokyo over the past few years.

With a severe shortage of available development sites and steep construction costs, developers are being forced to seek alternative options, such as buying existing buildings, renovating and re-selling them as the tenants gradually move out. While constructing a new building can take over 10 years if including land negotiations, renovating an existing building can take about 1 year before apartments are ready for re-sale. Tokyu are targeting buildings around 15 years of age, in prime locations, and with the ability to add value through renovations.

Majes Tower Roppongi 2
The original interior of a rental unit in Majes Tower Roppongi / Residia Tower Roppongi.

Majes Tower Roppongi 1

Majes Tower Roppongi 4

Sources:
The Kensetsu Tsushin Shimbun, October 13, 2015.
The Yomiuri Shimbun, September 25, 2015.
Advance Residence Investment Corporation News Release, December 25, 2014.

41 total views, 3 views today