TOKYO -- Mori Trust plans to purchase two office buildings in the U.S. city of Boston for a combined 75 billion yen ($658 million) as early as next month in a push to diversify its assets beyond the Japanese market.
A newly established local subsidiary will acquire a 19-story building and a 10-story property, both located in the business district, from leading U.S. insurer Liberty Mutual. The two properties together have 80,000 sq. meters of leasable area.
Mori Trust plans long-term ownership for a stable source of rental income. The investment return is projected at a minimum of 4%, on a par with the U.S. average.
The Japanese developer signed an agreement right after the U.S. presidential election. If President-elect Donald Trump keeps his spending promises and expectations for inflation grow, office space rents will increase and real estate prices will stay firm, the company reckons. But the massive investment comes with risks of appreciation in the yen and a cooling of the American economy.
Mori Trust's medium-term plan released in June calls for expansion beyond Japan, setting its sights on the U.S. and Europe. But given the economic uncertainty in Europe following the Brexit surprise, the company will focus on the American market for now. It is looking also at such other East Coast cities as New York and Washington, D.C., with an overseas budget of 100 billion yen to 200 billion yen. Building strong local management will be key for the developer, whose assets are mostly in Japan.
Mori Trust is joining the trend of Japanese developers bolstering investment in the U.S. Mitsui Fudosan is developing a 51-story building in Manhattan, where Mitsubishi Estate is also conducting a major renovation on a group building. NTT Urban Development has acquired a building in Washington, D.C.