GIC weighs sale of Tokyo office tower for more than US$2 billion

SINGAPORE sovereign wealth fund GIC is considering the sale of a top-grade Tokyo skyscraper and has approached potential buyers about the property, according to people with knowledge of the matter.

The tower, 43-story Shiodome City Center in one of Tokyo’s central business districts, may fetch a price of at least US$2 billion, two of the people said. Any deal of that size would make it one of the most expensive office building transactions ever in Japan. 

The sale plans come as a glut of new office supply is expected in Tokyo with the opening of several skyscrapers over the next two years, potentially tempering investor appetite for such a large tower. Globally, investors are also shying away from offices due to historically high vacancy rates in major cities. 

GIC has asked Mitsubishi UFJ Trust and Banking and JLL to advise on the sale, according to the people, who asked not to be identified as the matter is private. The wealth fund is seeking to take bids by year-end and complete the transaction by early 2024, two of the people said.

The process is still at an early stage, and GIC could ultimately decide not to go ahead with a sale, the people said. 

Tokyo’s top-grade office towers rarely change hands, as local developers tend to hold on to the properties they build. A GIC affiliate developed Shiodome City Center in 2003 with Mitsui Fudosan, one of Japan’s largest real estate companies. The building is home to the headquarters of ANA Holdings and Fujitsu.

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Representatives for GIC, Mitsubishi UFJ Trust and JLL declined to comment. A spokesperson for Mitsui Fudosan was not available for comment. 

There have been at least two similar grade and size building transactions in Tokyo in the past two years. The headquarters of Dentsu Group reportedly sold for around 300 billion yen (S$2.8 billion), and the Ministry of Finance offloaded its stake in Otemachi Place for 436 billion yen. Both went to Japanese consortiums. 

Tokyo’s office market has fared better than other major cities around the world, as work from home habits have not stuck in Japan. Although a vacancy rate at 6.46 per cent is high for Tokyo, it is well below levels seen in places like Hong Kong and New York. BLOOMBERG