Blackstone Buying Tokyo Commercial Complex From Seibu Holdings for $2.6B

Tokyo Garden Terrace Kioicho in Chiyoda ward (Image: Blackstone)

US private equity titan Blackstone is set to buy a commercial complex in central Tokyo from Seibu Holdings for $2.6 billion, a sum that would mark the largest-ever real estate acquisition by a foreign investor in Japan.

Funds managed by the Manhattan-based giant have entered definite agreements to acquire Tokyo Garden Terrace Kioicho from Seibu affiliates in Blackstone’s biggest investment to date in Asia’s second-largest economy, the NYSE-listed firm said Thursday in a release.

The 2.4 million square foot (222,967 square metre) development in Chiyoda ward comprises two fully occupied high-rise office towers, 135 residential units and a 250-key hotel, plus conference and wedding venues, restaurants and retail shops. Blackstone’s latest mega-deal comes amid a rush of foreign investment into Japan fuelled by the soft yen, low borrowing costs and undervalued assets.

“Japan has entered a new era of corporates seeking to partner with trusted groups like Blackstone to divest their assets for further growth,” said Daisuke Kitta, the firm’s head of real estate for Japan. “We are committed to mobilising our strong local teams with insights and relationships, and our global real estate platform, to continue to support this asset for long-term success.”

Unlocking Value
Blackstone’s acquisition price values Tokyo Garden Terrace Kioicho at JPY 400 billion, representing a 186.5 percent premium to the asset’s book value of JPY 139.6 billion, according to a Thursday statement by Seibu Holdings. The Tokyo-based conglomerate is set to reap a capital gain of JPY 260.4 billion when the transaction is completed on 28 February 2025.

Daisuke Kitta, head of Japan real estate for Blackstone

“Blackstone has provided a proposal that will contribute to further growth and development of the asset, and a valuation that reflects its strength,” said Seibu Holdings president Ryuichiro Nishiyama. “In the future, the Seibu Group companies will continue to be involved in the management of the asset, which includes undertaking the asset management business and hotel management business, and will provide even more attractive new value in Kioicho based on a long-term and strong partnership with Blackstone.”

Seibu will use the cash inflow from liquidating the 2016-vintage asset to make growth investments, repurchase shares and increase yearly dividends, the company said in a presentation. The group’s hotel unit previously sold a 31-asset hospitality portfolio to Singapore sovereign fund GIC for JPY 150 billion in a deal announced in February 2022.

Bloomberg first reported in November that Blackstone had emerged as the front runner to buy Tokyo Garden Terrace Kioicho after a months-long bidding process. The firm led by chairman and CEO Stephen Schwarzman has made Japan the scene of several big-ticket real estate deals in the past decade, including the purchase of eight hotels valued at $390 million from Kintetsu Group and the acquisition of six Daiwa House-built warehouses that were later sold to GIC for more than $800 million.

“Japan is one of our most important markets globally, where we have acquired $16 billion of real estate assets since 2013,” said Chris Heady, Blackstone’s Asia Pacific chairman and Asia real estate head. “This transaction represents our conviction in Japan and the deep partnerships we’ve built with leading Japanese companies like Seibu.”

AirTrunk Closing in Sight
The $2.6 billion trade with Seibu caps a busy stretch of dealmaking for Blackstone as 2024 nears an end, led by the pending $16.1 billion acquisition of Australia’s AirTrunk alongside the Canada Pension Plan Investment Board.

The purchase of the 800-megawatt data centre platform from a consortium led by Aussie finance giant Macquarie represents Blackstone’s largest-ever investment in Asia Pacific. The deal recently won regulatory approval and will be the fifth-largest takeover of a company based in Australia upon closing by the end of this month.

Blackstone’s assets under management reached a record $1.1 trillion at the end of the third quarter, with real estate accounting for 29.3 percent. The fund manager had $171.6 billion in dry powder as of that date, including $55.1 billion allocated to real estate.