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Japanese buyer out to spend $3B in Manhattan

By Konrad Putzier

Japanese real-estate giant Mitsui Fudosan plans to invest between $2 billion and $3 billion in Manhattan real estate over the next few years.

KEITH PURCELL
KEITH PURCELL

The sum by itself could be large enough to return Japan to the ranks of New York’s top foreign investors, reversing a decades-long decline in importance relative to countries like China or Brazil.

Mitsui Fudosan America’s vice president Keith Purcell told Real Estate Weekly that the company is in negotiations for two major development projects in Manhattan totaling well more than 1 million s/f, although he couldn’t comment on the specifics.

Purcell explained that the planned developments are part of a strategy to diversify Mitsui Fudosan’s holdings by 2017. “North of 90 percent of our current assets are in Japan, and our focus is on becoming a more globally diversified organization,” he said, adding that the company looks to invest heavily in the U.S., Europe and other Asian countries.

“Lately we’ve been more focused on office and residential new development because we think pricing on existing product is rather lofty,” Purcell said. Apart from New York City, Mitsui Fudosan is also looking to invest in other U.S. metropolitan areas like San Francisco, Washington D.C., Los Angeles, Boston and Seattle.

The Tokyo-based company, which has properties worth $40 billion on its books, is currently developing a speculative office building on Brannan Street in San Francisco, which it recently pre-leased. Mitsui Fudosan is also “in the process of entitling” an office development in San Francisco’s Soma neighborhood totaling 500,000 s/f.

1251 Avenue of the Americas
1251 Avenue of the Americas

In New York City, the company owns the 2.3-million s/f office tower 1251 Avenue of the Americas and the 200,000 s/f office tower 527 Madison Avenue. Last October, it sold the downtown office building 100 William Street to Canadian insurance firm Manulife.

Mitsui Fudosan bought 1251 Avenue of the Americas in the 1980s, when Japanese companies were by far the most active foreign buyers in New York City, snapping up high-profile buildings like the Empire State Building and the Rockefeller Center. The investment boom ended with a burst real estate bubble in Japan in the late 1980s that bankrupted several large investors and sent the Yen’s exchange rate vis-à-vis the dollar on a tailspin.

Although Mitsui Fudosan held on to 1251 Avenue of the Americas, most other Japanese investors left the New York market during the country’s decade of economic stagnation in the 1990s and have been slow to return since.

The current growth in foreign investment in New York real estate is driven by countries like China, Canada, Brazil and Norway, while Japanese investors have remained on the sidelines.

In 2013, Japanese companies bought $212 million worth of office properties in New York City, according to commercial brokerage Colliers International – well behind the $1.4 billion invested by Chinese companies. The sum also pales in comparison to the money invested from Canada ($893 million), Norway ($884 million), Brazil ($680 million), Singapore ($650 million) and the United Arab Emirates ($650 million).

In residential real estate, which Colliers’ data doesn’t cover, Japanese buyers have also been far less active than their European and Chinese counterparts, according to brokers.

Now Japanese investors are poised for a big return, and the competition among commercial buyers in Manhattan could become even stiffer in the coming years.

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