Some of Japan's Tokyu Land Corp.'s U.S. leaders are touring potential development sites in Texas and elsewhere this month as they seek to invest in new construction in the United States at a time when more Japanese capital is flowing into the country.
The Tokyo-based firm plans to spend between $200 million and $300 million on U.S. real estate this year, Tokyu Land's Head of Western U.S. Investments Ariel Mark told CoStar News.
"For the right opportunity, you can actually build at or below transactions today," said Mark, who is based in Tokyu Land's U.S. headquarters in Los Angeles, adding that the firm has a three- to five-year typical hold period for investments. "There are projects that can be done currently where the total project cost is less than what" the completed development sells for. "Then it makes sense to build."
The U.S. team has full autonomy to make decisions — a move that helps fast-track deals, Mark said. Since Tokyu Land set up the U.S. division in 2012, the company has invested $1.5 billion across major U.S. markets with a focus on office, multifamily and industrial properties.
Ben Cherney, Tokyu Land's executive vice president of U.S. investments, said the firm tends to gravitate toward U.S. gateway cities. The broader Dallas region is on the top of that list with "liquidity begetting more investment, which in turn produces more liquidity" in a "self-compounding effect," he told CoStar News.
Tokyu Land recently partnered with High Street Residential, a subsidiary of developer Trammell Crow, to build a luxury apartment complex in a Dallas suburb.
The Dallas-Fort Worth region is one of the nation's top-growing metropolitan areas with more than 8.4 million residents. That growth, coupled with the state's business-friendly climate, makes it easier than some U.S. cities to begin new construction and an attractive place to invest, Mark said.
Cherney and Mark each have their own stories in how they landed at Tokyu. Cherney said he almost didn't send in his resume after scanning a job posting that was clearly not written by a native English speaker. But the former CBRE executive spoke with a recruiter and was intrigued enough to become one of the first executives without a Japanese expatriate background to join the firm in 2017. Meanwhile, the Russian-Ukraine war brought Mark back to the United States after he spent years working for Russian developer PNK in Asia and Chinese developer China Fortune Land Development Co. in Singapore. He’s now been with Tokyu Land for four years.
Mark and Cherney, joined by a senior U.S. project adviser at Tokyu Land, Takatsugu Yamamoto, sat down with CoStar News to discuss the firm's first deal with High Street Residential and its future real estate investments in Texas and the United States. The following interview has been edited for length and clarity.
What do you wish United States investors or developers knew about Tokyu Land?
Mark: We are one of the biggest groups they haven't heard of. We are in the process of making everyone know what our bandwidth is and where we can play.
Cherney: The general perception of Japanese investors is they tend to move really slow. That's part of the reason why you see Japanese investors do a lot of development projects because the timelines are typically longer. But, at Tokyu, we have built a U.S. team with almost 50 people, and we have closed deals in as fast as three weeks.
Mark: Tokyu moves at Americanized speed.
What is Tokyu Land's outlook on its United States real estate investment in the next 12 to 18 months?
Mark: For most Asian investors, the U.S. is still one of the top markets to invest and that's very true for Japan.
Cherney: For Japanese capital of any kind, not just real estate, they see the need to diversify outside of Japan. For a long time, Japan has been a fairly insular environment and that is changing. They are not always the fastest to move, but when they do move, they move in large numbers and with conviction. The U.S. market, for all global investors, is the No. 1 destination for capital.
Because of that momentum, you are seeing a lot of Japanese capital come to the U.S., including Tokyu Land. We are ahead of the trend and have been investing in the U.S. since 2012. We have invested $1.5 billion in the U.S. so far, with more than $3 billion in assets.
What property types have you gravitated to backing in the United States?
Cherney: It's been largely multifamily; we've been starting on some industrial as well. We are in the process of closing on our next Dallas investment in Fort Worth with Crow Holdings to do ground-up industrial development.
How does political uncertainty affect your investment thesis?
Cherney: There's still a strong conviction. For Japanese capital, they take a long-term view, and they pick a strategy and short-term fluctuations don't derail those decisions.
Mark: Even with the geopolitical headlines, the safest place to invest is still in the U.S. dollar. If you are investing in the U.S. dollar, it makes sense to invest in U.S. real estate. Actually, a lot of capital from other parts of Asia are having currency devaluation, giving further reason to invest in the U.S. where you are investing in U.S. dollar-based assets.