Japan has been Asia’s top target for institutions shopping for rental residential assets, with much of the country’s appeal owing to the housing market’s stability, liquidity and scalability, according to a panel of experts who joined MTD TV’s Multi-Family Forum.
For Tuesday’s one-hour session, which was sponsored by Yardi, Mingtiandi founder Michael Cole welcomed Ed Boyd, senior managing director for APAC investment management at Greystar; Ken Sakuramoto, head of equity advisory for Japan at JLL; Rushabh Desai, CEO for APAC at Allianz Real Estate; and Joel Rothstein, shareholder and chair of the Asia real estate practice at Greenberg Traurig.
Boyd said Greystar has acquired more than 100 assets in Japan since the 2017 launch of the firm’s Asia Pacific platform, making the country the US apartment developer’s fastest-growing market in the region.
“I think Japan provides one of the most stable economic backdrops versus other developed countries,” he said. “Further, I think Tokyo remains one of the most liquid commercial property markets globally.”
Searching for Yield
Amid a climate of yield compression, institutional investors can expect multi-family yields in the range of 3 to 4 percent in urban Japan, with Tokyo’s yields tending to the low end of the range relative to cap rates in other key cities, said JLL’s Sakuramoto.
He noted that the sheer size of Greater Tokyo, with a population of about 40 million taken as a whole, affords the kind of scale sought by managers of billion-dollar funds. “We have tonnes of people with a highly dense population,” he said. “And on top of that, we are still seeing a lot of influx with people coming into the central part of Tokyo to look for jobs.”
Greenberg Traurig’s Rothstein, who has spent more than two decades structuring real estate transactions in both China and Japan, pointed to some of the benefits of working in one of Asia Pacific’s most developed and largest markets.
“If I’m an institutional investor and I have money to deploy for Asia, I’m going to be looking at Japan because of the fact that it has a market where you can have scalability,” he said. “It also is a market where you have ease of transactions.”
Fund managers’ enthusiasm has put a spotlight on Japan residential, Rothstein said, with the segment now accounting for 30 percent of client inquiries at his Tokyo real estate practice.
Don’t Sleep on Residential
Desai, whose firm manages capital on behalf of European finance giant Allianz and other like-minded institutional investors, said Allianz Real Estate has amassed a portfolio of 5,500 units in Japan (all in Tokyo) with a gross asset value of $1.7 billion. He said the COVID-19 pandemic had reminded institutional investors of the importance of residential assets after the recent fixation on logistics and office.
“Japanese residential is an incentive asset management play, but I think it is one of the plays where institutional investors can understand the dynamics and the fundamentals of the asset class,” Desai said. “And given the regulations and the rule of law in Japan, I think it is very attractive for an institutional investor to invest in this asset class.”
In addition to a large portfolio transaction in Japan likely to be announced this week, Desai also teased a $1 billion residential fund that Allianz Real Estate is set to launch this summer, targeting Japan’s top four cities and offering like-minded institutions the opportunity to invest alongside the fund manager.
You can watch the full discussion above.
Emerging Classes on Tap
On Tuesday 25 May, the Multi-Family Forum concludes with a panel on emerging rental-residential classes in Asia Pacific.
The hour-long session, sponsored by Yardi, will feature Jyoti Ramchandani, a managing director at SC Capital overseeing the private equity firm’s Score+ strategy; Shusaku Watanabe, head of Japan real estate for Nuveen; and Stephen Gaitanos, managing director and group CEO of Scape Student Living.
The panellists will discuss opportunities in high-yielding market segments like student housing, co-living and senior living.
MTD TV will be back again on 29 June to launch our Asia Logistics Real Estate Forum, which will feature speakers from GLP, Allianz, SC Capital, Logos, JLL and BW Industrial, as we bring together the region’s largest warehouse developers and investors.