German BVK trades Osaka office for nearby housing portfolio

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CBRE Global Investors and Universal-Investment have sold the Midosuji Grand Tower in Osaka and acquired a portfolio of more than 1,000 residential units in the city on behalf of German pension fund Bayerische Versorgungskammer (BVK).

Midosuji Grand Tower (image: CBRE Global Investors)

CBRE Global Investors and Universal-Investment, a German investment company, made both deals with Osaka-based real estate company Phoenix, according to an announcement. Financial details were not disclosed.

“The disposition of the office investment achieves a major milestone by realising strong investment performance for BVK, while simultaneously shifting capital to a more stable investment class at a time when market fundamentals are expected to peak and alternatives remain expensive,” said Jean-Antoine Robert, portfolio manager at CBRE Global Investors.

For investors, the Osaka market offers tight supply conditions, with CBRE reporting the Osaka All-Grade office vacancy rate sitting at an all-time low of 1.2% in Q2 2019, however a large volume of new supply is scheduled to enter the market in 2022.

The Midosuji Grand Tower, which CBRE Global Investors and Universal-Investment acquired in 2015, offers about 30,000 sq.m. of gross lettable space on Midosuji Street in Osaka’s central business district.

The office is situated within walking distance to the Shinsaibashi shopping and entertainment district, a popular tourist destination home to luxury brand flagship stores.

City Spire Nishinakajima (image: CBRE Global Investors)

“Amid the tight supply conditions, there have been an increasing number of cases involving tenants having to accept aggressive terms presented by owners,” said Hideo Oue, senior director of CBRE’s advisory and transaction services (Office), Kansai office. “Rents are likely to remain firm for some time.”

BVK’s newly acquired portfolio comprises 18 residential properties, including the City Spire Nishinakajima asset, across central Osaka. The portfolio, which has a blended occupancy of more than 95%, mostly features compact residential units near public transport.

The purchase marks the BVK mandate’s third investment in Japan and its 13th deal overall.

CBRE Global Investors APAC portfolio manager Michael Pierce said the stable income profile of residential real estate, coupled with high demand for compact homes, made the investment a great fit for BVK.

BVK is Germany’s largest pension scheme group and has €77bn in assets under management.

CBRE Global Investors is an investment manager with US$106.7bn in AUM.

Headquartered in Frankfurt/Main, Universal-Investment has fund assets of about €409bn under administration.