PAG buys Commerzbank’s Japanese real estate business
A PAG-led consortium has acquired a portfolio of around EUR700 million ($954 million) in primary subordinated loans held by Commerzbank’s Japan real estate subsidiary, plus local operations and staff.
The buyers of Commerz Japan Real Estate Finance Corporation (CJREFC) include PAG's Secured Capital REP V, special situations funds managed by an affiliate of PAG, and Canada Pension Plan Investment Board (CPPIB). The portfolio will be managed by Tokyo-based Secured Capital Investment Management, which itself was acquired by PAG in 2011.
"This is a very high quality portfolio of largely Tokyo-based commercial real estate and we are uniquely positioned in this market to manage and realize its value," J-P Toppino, managing partner of PAG's real estate division, said in a statement.
He added that Tokyo's real estate market is one of the most liquid in the world and is attracting strong interest from both foreign and domestic investors. Office rents are expected to increase over the next 12-24 months, pushing up capital values, while low to moderate debt financing is available at less than 1%.
Toppino said these factors make Tokyo one of the most attractive markets globally in terms of cash-on-cash yields.
PAG has $11 billion in capital under management across private equity, real estate and absolute returns strategies. Secured Capital Investment Management, which is part of PAG's real estate division, has more than 100 professionals and over $9 billion in real estate assets under management.
Earlier this month, PAG Asia Capital, the firm's private equity unit, agreed to buy DTZ, the property services arm of Australia-listed UGL, for an enterprise valuation of A$1.22 billion ($1.2 billion). PAG and TPG Capital co-led the transaction, with Ontario Teachers' Pension Plan (OTPP) participating as a co-investor.
Commerzbank has sold off several commercial real estate financing assets recently as part of efforts to improve its core capital position and reduce risk exposure. A portfolio of Spanish real estate loans worth EUR4.4 billion was sold to J.P. Morgan and Lone Star alongside a portfolio of non-performing real estate loans in Portugal.
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