Blackstone Buying Back Japanese Apartments From Anbang for JPY 300B

Blackstone is poised to buy back a portfolio of Japanese rental apartments from troubled mainland insurer Anbang Insurance for JPY 300 billion ($2.7 billion) in what would be the largest property deal ever in Japan.

Stephen Schwarzman’s Blackstone, which has $163 billion in real estate assets under management, has signed an agreement to take back possession of 221 rental apartments the company had sold to Anbang three years ago for around JPY 260 billion, according to a source close to the deal who spoke to Mingtiandi.

The US private equity giant is buying the portfolio through a strategy focused on Japanese residential properties in major city centres including Tokyo, Nagoya, Osaka and Fukuoka where there is high population growth driven by young professionals, the source added.

Should the deal complete, it would beat the record for the largest ever real estate acquisition in Japan set in 2007 when Morgan Stanley purchased 13 hotels for close to JPY 280 billion from Japanese airline ANA.

Blackstone representatives declined to comment on the deal when approached by Mingtiandi. The Nikkei Asian Review was the first to break the story.

Nationalised Insurer Continues to Sell Assets

Anbang is selling the apartments after formally putting the portfolio on the market – for the second time – in August last year, just eighteen months after Chinese regulators took control of the scandal-hit mainland insurer.

With chairman Wu Xiaohui detained for fraud in 2017 in the aftermath of the trophy hunting insurer’s $30 billion overseas shopping binge, Anbang’s first attempt at offloading the Japanese portfolio in 2018 failed to find a buyer.

Since then, Anbang, which shouldered its way onto the world stage by acquiring the Waldorf Astoria from Blackstone’s Hilton Hotels Group for $1.95 billion in 2014, has been racing to sell off assets to shore up its balance sheet.

The bulk of the Japanese apartments which Blackstone is acquiring from Anbang were part of the firm’s maiden apartment acquisition in the country in 2014 when it purchased 200 blocks of flats from General Electric for around JPY 190 billion.

Blackstone Relationship Continues

Anbang’s residential disposal is being finalised five months after the insurer sold off the Strategic Hotels Group portfolio to Korea’s Mirae Asset for $5.8 billion. That asset sale came  just over three years after Anbang had acquired the set of US luxury hotels from Blackstone for $5.5 billion in 2016.

In December, Anbang once again put up for sale its 35 percent stake in mainland financial institution Chengdu Rural Commercial Bank, seeking to raise RMB 16.5 billion ($2.4 billion) from that disposition.

Anbang’s sale of its Japanese residential portfolio to Blackstone is taking place just under one year after the US private equity giant teamed up with Los Angeles-based Hudson Pacific Properties to acquire the Bentall Centre in Vancouver from the troubled insurer.

The price the joint venture paid for the Canadian office and retail complex has not been disclosed, but Anbang had originally bought the asset in early 2016 for C$1 billion ($750 million).

Global Institutions Bet on Japanese Rental Apartments

Anbang is returning the apartment portfolio to its previous owner as institutional investors race to get a slice of the stable returns generated by Japan’s residential sector.

Data analytics firm Real Capital Analytics said in a November report that Japan was the largest market in APAC for investment in rental apartments during the first three quarters of 2019, with the country’s $2.4 billion in rental residential transactions representing 10 percent of the country’s investment in income-generating real estate assets during the period.

“Investors active in all regions of the globe have always understood the benefits of low capex to NOI and slow, stable returns offered by the apartment sector,” the author of the report, Jim Novello, noted.

Blackstone will be replenishing its stock of Japanese rental apartments after selling a portfolio of 82 multifamily assets to Allianz Real Estate for €1.1 billion ($1.2 billion) just four months ago.

More recently, Nuveen Real Estate announced in January that it had teamed up with Japanese asset manager Kenedix to purchase seven Tokyo apartment blocks for $224 million, which expanded an existing Japan multifamily strategy that the London-based firm had earlier established with Holland’s Bouwinvest.

Nuveen’s announcement came just under a month after Greystar Real Estate Partners named Akira Kosugi as its new head of Japan, as the US multifamily giant prepares to invest around $200 million in its first acquisition in the country.

Aberdeen Standard is also targeting Japan’s residential sector, with the UK-based firm announcing in June 2018 that it would be working with Sumitomo Mitsui Trust Bank to invest in multifamily properties across Asia Pacific with a focus on Japan.