Meguro Gajoen back on the market

On May 11, the Toyo Keizai Online publication reported that China’s sovereign wealth fund is considering the sale of the landmark Meguro Gajoen hotel and office property in Tokyo.

The asking price has not been disclosed but Toyo Keizai suggests it could be as high as 200 billion Yen (approx. US$1.54 billion). In Yen terms, this would be a 40% increase over what China Investment Corporation (CIC) paid for it. 

The 37,000 sqm site is a 3-minute walk from Meguro Station and includes five buildings. The 19-story Arco Tower was completed in 1991, and the 16-story Arco Tower Annex was completed in 2011. The former operator of Gajoen hit some hardships following the collapse of the bubble economy in the early 1990s and filed for bankruptcy in 2002. The property was then acquired by Lone Star, which sold it to Mori Trust in August 2014 for 130 billion Yen. Five months later Mori sold it to CIC for 143 billion Yen (approx. US$1.2 billion).

The main tenant in the commercial space is Amazon Japan. As Tokyo’s office market has improved since the property last traded hands in 2015, newly contracted rents are now higher, contributing to a higher property value based on yield. Toyo Keizai suggests that the rent paid by the hotel operator under a fixed-term lease is lower than market rates, creating an opportunity for boosting returns in the future, potentially through a high-rise redevelopment. 

Source: Toyo Keizai Online, May 11, 2022.

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