Blackstone Sells 30 Japanese Residential Assets to M&G Real Estate for $424M

UK-based asset manager M&G Real Estate has acquired a portfolio of 30 residential properties in key Japanese cities from Blackstone for JPY 49.2 billion ($424.3 million).

The purchase comprises 1,575 apartments across Tokyo, Osaka and Nagoya and was made on behalf of the M&G Asia Property Fund, bringing the vehicle’s assets under management in Japan’s multifamily sector to JPY 109.3 billion ($942.6 million), M&G said Friday in a release.

“Japanese multifamily residential has proven itself through various economic shocks, highlighting the ability of the asset class to enhance risk-adjusted returns for core investors,” said Richard van den Berg, manager of M&G Asia Property Fund.

An M&G representative told Mingtiandi that the seller was a global alternative investment management company. A person familiar with the deal identified the vendor as Blackstone, with JLL advising the US private equity giant on the disposal.

Market Springs to Life

The portfolio’s flagship assets include the 2007-vintage Grace Residence Tokyo, a 12-storey building near Hatchobori railway station in the capital’s Chuo special ward, and the Luxe Shin-Osaka I & II complex developed by local builder Chinju and owned by Singapore’s Straits Trading from its completion in 2016 until late 2019.

The big-ticket transaction comes after a Japan rental residential market that set new records in 2020 fell back to earth last year. Transactions of rental apartment assets fell 59 percent year-on-year in 2021’s fourth quarter to JPY 119.3 billion and dropped 40 percent to JPY 602.5 billion for the full year, according to a recent report by Real Capital Analytics.

Benjamin Chow, RCA’s head of real estate research for Asia, noted that 2020’s standout volume included deals like Blackstone’s JPY 300 billion ($2.7 billion) acquisition of the Anbang residential portfolio and AXA IM’s JPY 70 billion ($669 million) purchase of a Tokyo apartment portfolio.

Blackstone had bought back the 221 rental apartments from troubled insurer Anbang in Japan’s biggest-ever real estate transaction after selling them to the Chinese firm for about JPY 260 billion three years earlier.

Walking the Walk

M&G Real Estate entered Japan’s residential market as early as 2014. The firm’s previous deals in the country include the 2018 purchase of a portfolio of residential buildings in Chiba, Fukuoka and Osaka for $83.7 million, which marked the firm’s fifth acquisition in the country since the launch of its core Asia property strategy in 2006.

M&G paid $50 million for two Osaka residential buildings containing 280 units in a deal announced last May.

During an online briefing in January, M&G executives said healthy demand for real estate in Japan’s major cities would drive growth in Asia’s second-largest economy this year. Van den Berg reiterated that conviction in Friday’s statement, saying the latest portfolio acquisition would bolster the resilience of M&G Asia Property Fund from an income stability perspective.

“Our increased allocation to the residential sector also provides diversification benefits as residential assets are often regarded as counter-cyclical investments relative to the commercial office and retail sectors,” the fund manager said.