Scale, Efficiency Key to APAC Living Sector Returns Say Dash, PGIM: MTD TV

Value-add investors in Asia Pacific’s living sector can boost returns by aggregating properties into larger portfolios and leveraging technology to create efficient platforms, Aaron Lee, founder and CEO of Dash Living and David Fassbender, head of Japan at PGIM Real Estate told Mingtiandi’s APAC Residential Forum on Wednesday. Watch the full recording>>

During the interview, which was sponsored by Yardi and streamed live on MTD TV, Fassbender, whose company has ramped up its investments in rental housing in Australia, Japan, and China in the last few years, explained to Mingtiandi how consolidating individual assets into a scaled portfolio can help to create a more attractive target for core investors at the same time that it provides greater operating efficiencies.

“We need to create something that’s attractive for a core buyer,” Fassbender said. “One of the key challenges in residential across the region is that individual assets tend to be relatively small…so creating a larger portfolio does make sense as we look forward to an exit. So yes, efficiency is critically important and the larger the portfolio, at least if it’s concentrated within a certain area, the more efficiently you can manage this.”

The session with Lee and Fassbender came two months after PGIM Real Estate and Dash Living teamed up to acquire The Sheung Wan hotel in Hong Kong as their second residential project in the city, with Dash also managing PGIM’s Dash Living on Hollywood project.

Tech-Enhanced Profits

Lee noted that Dash Living has been able to boost returns on rental residential investments by adopting technology which allows it to centralise operational resources in lower cost regions such as the Philippines and mainland China, as well as by implementing operations on a remote basis.

“From an operational perspective, technology is a big driving factor to what we do,” Lee said. “Because of technology you’re able to do a lot of things remotely, we’re able to operate units remotely. What that means is actually we’re able to get assets that no longer need as much of the labor intensive, expensive humans on site. We can operate with much less. So what that means is we’re able to drive up rental yields on the asset level.”

In addition to unlocking cost savings, Dash Living has also raised its revenue by managing its facilities to accommodate both short term visitors as well as longer term tenants, with the higher rates achieved through short term rentals appealing to investors looking for yields in an increasingly competitive rental residential market in the region.

“We try to maximise the yields to make it attractive for institutions,” Lee said. “In terms of the gross…we actually offer uplift in the gross rentals by doing both long-stay and short-stay. From the guest perspective, we’re offering flexibility, everything inclusive in the offering. So as a result, the gross is significantly uplifted.”

Australia, Japan Stand Out

PGIM Real Estate, which managed and administered $9.4 billion of assets in Asia Pacific and $210 billion of assets globally across its core, core plus, value-add and debt strategies as of December, has actively invested in multi-family opportunities, with the sector making up the majority of the fund manager’s commitments globally.

Having first invested in Japanese rental housing in 2011, PGIM Real Estate has become judicious regarding investments in the sector recently and is working to identify favourable geographies as valuations rise, Fassbender said.

“We have actually been very selective in this particular sector for the last two years plus,” Fassbender said. “We felt pricing had gotten to a level where it was difficult to justify certain investments. Yes, we’ve continued to invest in the market, but much more selectively and very much focused on the individual submarkets or micro-locations and adding to the portfolios that we had already built within our existing mandates.”

PGIM in 2021 acquired a six-building multifamily portfolio totaling 353 units in the Japanese cities of Tokyo and Yokohama, and during the same year picked up a portfolio of four Tokyo apartment buildings totaling 282 units in a joint venture with Tokyo-based Alyssa Partners.

In Australia, PGIM is looking beyond traditional multi-family to explore opportunities in student housing, senior housing, and co-living.

“When you look at a market like Australia, we see a much broader spectrum of opportunities within the living sector,” Fassbender said. “We’ve recently made student housing investments, senior housing investments, and we have also set up a programmatic joint venture with a local partner to grow a co-living platform…we have chosen this strategy because we think it’s better aligned with some of the fundamentals and allows us to achieve the returns we need.”

For Dash Living, which operates a portfolio of 26 assets totaling over 2,000 rooms across Hong Kong, Singapore, Japan and Australia, Lee sees opportunities to increase revenues in Japan by adding short-stay options for visitors to the mainstream long-stay segment, with Lee highlighting the market as being the “most adaptable.”

Lee also sees opportunity to acquire distressed assets in Hong Kong, as well as capitalise on growing rental demand in Singapore on the back of an influx of expat professionals.

Heading Down Under

Mingtiandi’s APAC Residential Forum concludes Thursday with a panel discussion on Australia’s build-to-rent market, where acquisitions of income-earning properties nearly doubled last year to top $2 billion.

The one-hour programme on MTD TV will feature Dan McLennan, founder and co-CEO of Local: Residential; Keith Lucas, managing director for Australia at Sentinel; Stephen Gaitanos, managing director and group CEO of Scape; and Alek Misev, head of property at Aware Super.

The four panelists will examine how developers, investors and operators are taking advantage of opportunities in Australia’s BTR sector, as well as the booming student housing space.

The show will stream live at 10am Hong Kong time and end with a live Q&A session in which viewers can quiz the speakers on their market views. Viewers can register their attendance here.