Allianz Expands Japan Multifamily Portfolio with €110M Tokyo Buy

Allianz Real Estate has braved the downturn in Japan to pick up a portfolio of multifamily properties in Tokyo for €110 million ($122 million), announcing the deal just weeks after the property investment arm of the European insurance giant opened an office in the city.

A spokesperson from the company told Mingtiandi that it had signed an agreement with an undisclosed seller at the end of March to acquire 11 newly developed rental apartment properties within the Japanese capital’s 23 core wards, with the 275 unit portfolio spanning a net leasable area of 8,400 square metres (90,417 square feet).

The acquisition continues an expansion drive for the insurer which saw it ramp up its assets across Asia Pacific by 83 percent last year to €5.5 billion ($6 billion) as well as opening its first office China this month at the same time that it established its debut presence in Tokyo, as the firm grows its real estate holdings in the region.

“This is an excellent addition to our existing multifamily residential portfolio in Japan, a sought-after asset class offering one of the highest stabilized yield spreads in the region,” said Allianz Real Estate’s APAC CEO, Rushabh Desai.

Targeting Defensive Assets in Tokyo

“Multi-family assets in Japan’s ‘big four‘ cities, particularly Tokyo, continue to remain attractive with strong urbanization trends coupled with limited net supply,” Desai explained in a statement announcing Allianz’ most recent acquisition.

At the €110 million transaction price, the insurer is paying the equivalent of €13,095 per square metre of net leasable area for the properties, which are within six minutes’ walking distance of subway stations and have a diversified tenant mix at an occupancy rate of more than 90 percent.

The acquisition comes seven months after the insurer marked its first direct transaction in the Japanese real estate market by purchasing a portfolio of multifamily assets from Blackstone for $1.1 billion.

That October buy gave Allianz ownership of 82 properties located across major cities including Tokyo, Osaka, Nagoya and Fukuoka, comprising a 4,600 homes covering 160,000 square metres of net leasable area.

The portfolio is over 96 percent occupied, and has enjoyed steady rental growth, according to Desai.

Allianz had secured the assets at a 19 percent discount on Blackstone’s reported initial asking price of $1.5 billion when the private equity firm first put the apartments on the market last July.

Aiming at Japan’s Big Four

The firm is upping its bet on Japan’s residential sector as the country’s property market comes under pressure from a recession triggered by the COVID-19 pandemic and the subsequent year-long postponement of the Olympics, which was set to give Tokyo’s economy a multi-billion dollar boost.

Despite the downturn, which has already resulted in lower salary hikes in the country’s annual spring negotiations between employers and unions, the multifamily sector is expected to remain stable, according to Savills’ head of research and consultancy in Tokyo, Tetsuya Kaneko.

In the first three months of the year, rents rose 5.8 percent to JPY 4,155 per square metre compared with the same period in 2019, which Kaneko says demonstrates a resilience similar to the sector’s stability in the wake of the 2008 financial crisis.

Piling into Japan Residential

Against a backdrop of virus-fuelled uncertainty in the Asia Pacific property markets, Allianz is one of a number of global institutions targeting Japan’s rental apartments.

In March, Nuveen Real Estate spent $140 million to purchase ten multifamily assets in Tokyo and Osaska on behalf of its open-ended Asia Pacific Cities fund, adding to seven properties it had acquired in January for $224 million.

A month before that acquisition, Blackstone notched Japan’s largest property deal ever when it agreed to buy back a portfolio of Japanese rental apartments from China’s troubled Anbang Insurance for JPY 300 billion.

Greystar Real Estate Partners is also gearing up for its first acquisition in Japan, after revealing last December that it was preparing to invest around $200 million to develop a rental apartment project in Tokyo.