UBS AM Bets Big on Japan Multi-Family With $230M Tokyo Development Project

UBS Asset Management has launched a multi-family development project in east-central Tokyo that is expected to be worth $230 million upon completion, as Japan’s red-hot rental residential market continues to soak up foreign capital.

The project in Koto ward’s Kiba neighbourhood will feature 563 rental apartments across 18 floors on a 7,000 square metre (75,347 square foot) site, making the development UBS AM’s largest multi-family effort to date in Asia’s second-largest economy. On the ground floor, 2,300 square metres of space has been pre-leased to a supermarket operator on a long-term lease.

The news marks UBS AM’s fourth multi-family deal in Tokyo this year, having earlier bought two development sites and a newly built property that together added more than 270 units to the portfolio, the fund management arm of the Swiss investment bank said Monday in a release. Last year the firm closed on four development deals in Tokyo, adding 350 units, with the Japan multi-family portfolio now comprising over 2,400 units under management or development with an end value in excess of $750 million.

“We have been active in the multi-family sector globally for 80 years and today manage over 75,000 individual units worldwide worth over $30 billion,” said John Mowat, head of Asia Pacific real estate at UBS AM. “We are pleased to leverage this global experience to grow our footprint in APAC and in Japan in particular, where we continue to see high client demand due to solid fundamentals, attractive yield spreads and availability of accretive debt financing.”

Early-Stage Investment

Targeted for completion in early 2026, the Kiba project is being developed on behalf of a separate account mandate through a partnership with a local listed developer, UBS AM said.

The arrangement departs from the pattern seen in recent Japan multi-family deals, in which investors either acquired existing buildings or bought in before a project was completed but after construction had begun. To get involved earlier in the process means taking on more development risk in order to maximise returns in an increasingly competitive market.

The first half of 2023 witnessed a steady stream of rental residential deals, as Singapore’s Q Investment Partners in June picked up its own 42-unit Kiba property as the fourth and final asset of the private equity firm’s Japan multi-family housing fund, marking the closure of the $50 million vehicle.

In a pair of deals announced earlier that same month, Abu Dhabi’s Mubadala Investment Company teamed with Canadian giant Manulife and US private equity shop Proprium Capital Partners on a joint venture to assemble a multi-family portfolio worth up to JPY 80 billion ($600 million), while Hong Kong’s Arch Capital Management revealed its acquisition of 25 multi-family assets in Tokyo for an undisclosed amount.

In April, Singapore-based SilkRoad Property Partners announced its entry into Japan with the acquisition of five multi-family assets in Greater Tokyo as part of $150 million in deals that also bagged a central Tokyo office building.

Logistics Asset Sold

Also Monday, UBS AM announced the disposal of a Tokyo Bay area logistics asset for more than $30 million after a “successful repositioning play”.

The firm had acquired the 1985-vintage asset during the COVID-19 pandemic in 2020 with one month remaining on a lease to the sole tenant. The property was re-tenanted on a long-term lease at above-market rent, UBS AM said, following renovations that included modernising the warehouse, rebuilding the adjacent office building and implementing ESG upgrades.

“We are proud to have revitalised the industrial asset with leading ESG credentials while realising a return of over 20 percent IRR for our clients,” said Hajime Watanabe, president of UBS Japan Advisors. “We continue to see opportunities for attractive risk-adjusted returns across all sectors in Japan that we are actively working to deploy our clients’ capital into.”