Weave, BlackRock See Management Boosting APAC Living Sector Returns: MTD TV

Investors in Asia Pacific’s living sector are turning to operator-enhanced strategies to boost rents and maximise asset valuations, Sachin Doshi, founder and CEO of Weave Living and Hamish MacDonald, head of APAC real estate at BlackRock 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, Doshi and MacDonald explained to Mingtiandi founder Michael Cole how an effective management of multi-family properties allows for product differentiation and pricing adaptability, with institutional-grade operations enhancing asset valuations.

“We are asset owners as much as we are operators,” said Doshi. “So for us, a significant portion of the value creation through active operations is captured in the capital value of the asset. So as an owner-operator who co-invests significant amounts of equity in every single deal that we invest in, whether it’s with BlackRock or with other capital partners, we are fully aligned in maximising the value of the real estate.”

The session with Doshi and MacDonald came a month after Weave Living and a BlackRock fund unveiled a joint venture to acquire a serviced apartment block in Singapore’s Bugis area for S$148 million ($111 million), with plans to reopen the property in early 2025 under the Weave Suites serviced accommodation brand.

Dynamic Pricing

MacDonald pointed to the tie-up with Weave as leveraging effective management to boost returns amid a higher inflation environment.

“What institutional investors want now is the ability for direct transmission of inflation plus, and that generally, not always, but generally, means some more operational risk,” said MacDonald. “And so this (living) sector actually helps you capture that type of rental growth, and all the more reason for having to partner with best-in-class partners like Weave Living for us. So absolutely, the real estate industry is moving far more into the higher operational space so that they can capture more operational growth.”

For Weave Living, being both operator and owner enables the company to tailor its product offering to market requirements, with Weave’s four brands – Weave Residences, Weave Studios, Weave Suites and Weave Place – catering to different customer segments, while the company is able to adapt pricing to the market.

“There isn’t a one-size-fits-all approach – each market has different demand drivers and different requirements in terms of what the market needs from a product solution perspective,” said Doshi. “As an owner-operator, we have the ability of selecting what product and what target customer suits different locations that we can go into, and allows us to leverage the overall platform over a much broader living sector umbrella, rather than purely focusing on either student housing or serviced apartments or traditional multi-family .”

Japan, Singapore in Focus

Japan continues to be a key market for Weave and BlackRock, with the investors seeing opportunities to boost rental growth and yields by disrupting the country’s traditional two-year lease model through active management and product differentiation.

“We don’t think cap rates are going to be compressing anymore (in Japan), to say the least,” said MacDonald, adding that the shift in Japan’s interest rate policy is driving the fund manager to seek rental growth in new sectors and strategies.

“And so strategies like what Weave Living is pursuing are interesting in that…if you can find the right submarkets with the right unit mix, et cetera, and then have a great partner who can capture those rents and that growth more often than in a standard two-year Japanese lease rollover, then I think you’re onto something interesting,” MacDonald added.

BlackRock has been investing in the Japanese multi-family sector for years, while Weave Living earlier this year launched fundraising for its inaugural multi-family fund dedicated to the Japan market, with an initial target of raising $500 million.

Weave’s Japan Residential Venture I fund will be seeded with a portfolio of 11 recently completed assets in prime Tokyo locations which the company has acquired over the past four months, including nine assets totaling 352 units acquired by Weave last September for its entry into the Japan market.

In Singapore, the partners’ recent tie-up aims to tap demand for serviced apartments with high-end amenities, which MacDonald described as a relatively small “niche” market yet “highly” in demand. The Citadines Mount Sophia asset which the partners agreed to acquire last month represents BlackRock’s first direct multi-family acquisition in the Lion City and Weave’s second property in the city-state.

“What does not exist (in Singapore) is this conveniently located, amenitised offering that suits people who may not be looking for a two to three year accommodation solution, but perhaps looking for a convenient place to live for six to nine months or maybe up to a year,” said Doshi. “People are traveling in and out of Singapore for project based work, and the alternative is a dull, serviced apartment or paying an arm and a leg for a hotel room over an extended period of time. So there’s a very clear market gap.”

The partners also expressed interest in Australia’s build-to-rent sector, while Weave is also preparing to establish operations in South Korea.

China Opportunities Up Next

Mingtiandi’s APAC Residential Forum 2024 continues on Thursday with a panel on multi-family investment in China featuring Selena Shi, managing director of acquisitions and RMB fund at LaSalle Investment Management; Jialin Li, managing director at Greystar; and James MacDonald, head of China research at Savills.

The panelists will examine the forces creating opportunities for investors in China’s rental residential sector after multi-family deal volume in Asia’s largest economy surged 30 percent last year to $1.94 billion, according to MSCI Real Assets.

The hour-long programme, which is sponsored by Yardi, begins at 10am Hong Kong time and will conclude with a live Q&A session, where attendees can quiz the speakers on their outlooks for the multi-family space. Viewers can register their attendance here.