Singapore-based Keppel REIT is acquiring a 98.47% stake in Ginza 2-chome, a freehold boutique office building in Tokyo, Japan. The remaining 1.53% interest in the property will be held by Keppel Capital Japan.

The total purchase consideration for 100% of the trust beneficial interest in the property is 8.97 billion yen (US$60.9 million), of which Keppel REIT will be liable to pay 8.83 billion yen for its stake in the property.

Keppel REIT chief executive officer Koh Wee Lih says the acquisition marks the real estate investment trust manager’s entry into Japan. “In line with our active portfolio management strategy, we believe this quality addition will strengthen our geographical and income diversification, provide greater stability and enhance Keppel REIT’s overall portfolio returns,” Koh notes.

Completed in 2008, Ginza 2-chome comprises eight stories of office space and a retail unit on the ground floor, offering a total net lettable area (NLA) of 3,427.1 square metres. It is easily accessible via the Tokyo Metro.

The property has a Comprehensive Assessment System for Built Environment Efficiency (CASBEE) A rating. The CASBEE Sustainability Rating system is one of the more widely adopted green certifications in Japan.

The building is currently anchored by Netyear Group Corporation, a subsidiary of NTT Data Corporation, with a weighted average lease expiry (WALE) of 3.4 years as at October 28.

Once fully leased, the property is expected to bring a net property income yield of approximately 3.1% and pro forma DPU (distribution per unit) accretion of 0.5%.

Keppel Capital Japan, which has been operating in Japan since 2005, will be appointed the local asset manager for the property.

The acquisition, which is expected to be completed by the end of November 2022, will be funded entirely with yen-denominated borrowings.

Post-acquisition, Keppel REIT’s aggregate leverage would be approximately 39%. Its assets under management (AUM) will be approximately S$9 billion (US$6.37 billion) across 12 properties in Singapore (77.8% of AUM), Australia (18.0%), South Korea (3.2%) and Japan (1.0%, and the proportion of freehold assets in its portfolio will increase from 30.1% to 30.7% (by NLA).

Ginza 2-chome comprises eight stories of office space and a retail unit on the ground floor, offering a total net lettable area of 3,427.1 square metres.