May 10, 2013

CPPIB & GE Capital Real Estate Form USD 400 million Tokyo Office JV

Canada Pension Plan Investment Board (CPPIB) and  GE Capital Real Estate (GECRE) have announced a co-investment program to invest in central Tokyo office properties (May 8). According to the joint press release by CPPI and GECRE:

Canada Pension Plan Investment Board (CPPIB) and GE Capital Real Estate (GECRE) announced today the recent formation of the Tokyo Office Venture (TOV) targeting investment in mid-size Class A-B offices in key Central Business District sub-markets.

CPPIB and GECRE will initially invest a combined equity amount of up to JPY40 billion (US$403 million) in this new venture on a 49%/51% basis respectively. The TOV program will focus on core- plus and value-add opportunities.

This venture will leverage the locally-based origination, underwriting, asset management and leasing teams of GE Japan Corporation, a wholly-owned subsidiary of General Electric Capital Corporation.

Graeme Eadie, Senior Vice-President and Head of Real Estate Investments, CPPIB, said: “This opportunity provides us with an attractive entry point to the Tokyo office sector and supports our strategy to expand our real estate portfolio in Asia. We look forward to partnering with GECRE, one of the world’s premier real estate lessors with a proven track record in Japan.”

Fran├žois Trausch, President of GE Capital Real Estate Asia Pacific, said: “By combining GE Capital’s deep domain expertise in Japan with CPPIB’s global investment reach, this co-investment program aims to bring two large real estate players together to tap the current opportunities of the office market in Tokyo. We are pleased to have CPPIB as a partner and look forward to working together as we ramp-up our sourcing activities to identify compelling commercial real estate opportunities that will generate attractive risk-adjusted returns for the TOV program.”

GE Capital Real Estate has been actively originating and managing real estate properties in Japan since 1998, and has acquired over US$6.9 billion office assets over that time.

According to PERE, a CPPIB spokeswoman said that the financial crisis has had a “disproportionate impact on the Tokyo office market,” and the firm’s research suggests that the cycle has been bottoming out over the past few months. Thus, the firm believes Tokyo’s office market “offers attractive pricing dynamics, deal access and potential for outperformance.”  PERE also "understands that its total investment capacity is around $1.2 billion."

This is CPPIB’s second joint venture in Japan, following its $1.132 billion JV with Global Logistic Properties.