Blackstone has agreed to sell a portfolio of rental apartment properties in Japan to Allianz Real Estate for €1.1 billion ($1.2 billion), according to an announcement by the Paris and Munich-headquartered insurer.
Marking its entry into the Japanese residential market, the property investment arm of the European insurer is poised to buy 82 multifamily assets located across major cities in the country from funds managed by the US private equity giant.
An Allianz Real Estate spokesperson told Mingtiandi that the deal is the insurer’s first direct multifamily acquisition in Asia.
Moving Beyond Offices and Warehouses into Apartments
“We are very excited about our foray into the Japanese residential market with this portfolio,” said Rushabh Desai, Asia Pacific CEO of Allianz Real Estate. “This is an outstanding opportunity for Allianz to secure a meaningful exposure to the Japanese multifamily residential sector, a sought-after asset class offering one of the highest stabilized yield spreads in the world.”
The transaction, which is expected to complete by the end of this year, is the latest in a series of investments in Asia by the European insurer as it moves beyond its earlier investments in Asian offices, retail and logistics space into the multifamily sector.
“Japan has the largest multifamily market in Asia Pacific, supported by its strong fundamentals and healthy occupancy rates,” said Stuart Crow, capital markets CEO of JLL Asia Pacific, which represented Blackstone in the disposal. “This deal underpins the growing investor interest as we’re starting to see increasing institutional capital drawn to this sector’s stable outlook, low volatility and high yield characteristics.”
Crow added that despite the lower risk nature of the multifamily asset class, capitalisation rates for core Tokyo products are at a premium compared with typical grade A retail and office assets. Blackstone representatives declined to comment on the transaction.
Allianz Secures Portfolio at a Discount
Allianz secured the assets at a 19 percent discount on the $1.5 billion price reported when Blackstone put the portfolio on the market just over four months ago.
“Japan is the world’s third largest multi-family residential market with strong urbanization trends coupled with limited net supply in the four major cities,” said Desai.
Comprising a total of 4,600 units covering a total of 160,000 square metres (1.7 million square feet) of net lettable area, the portfolio has an occupancy rate of 97 percent with a “well-diversified” tenant base, according to Allianz. At the $1.2 billion transaction price, the insurer is paying the equivalent of $7,500 per square metre of net lettable area.
55 percent of the properties are located within the capital’s 23 core wards, while 90 percent of the assets in the stabilised portfolio are within ten minutes of a metro station. Some seventy-eight of the 82 freehold properties are in Japan’s four largest metro areas of Tokyo, Osaka, Nagoya and Fukuoka.
When Blackstone put the multifamily assets on the market in May, the portfolio was said to carry an aggregate passing rent of JPY 4.9 billion ($45.8 million) per year.
Allianz said in its statement that the acquisition was in line with the group’s strategy of acquiring core income-producing assets for long-term investment.
Blackstone Swaps Homes for Sheds
The sale to Allianz comes five years after Blackstone had acquired 200 blocks of flats from General Electric’s property arm in 2014 for more than JPY 190 billion as its entry into Japan’s residential market.
With Japan’s property market picking up speed, Blackstone expanded its housing portfolio in the country a year later with an acquisition of 59 properties in Tokyo, Osaka and Nagoya from London-listed Japan Residential Investment for $450 million.
The firm sold a large chunk of its Japanese residential assets to Chinese insurer Anbang just under three years ago for $2.3 billion.
Blackstone’s decision to dispose of the set of multifamily properties to Allianz comes as the asset manager ramps up its logistics investments in Japan and other parts of the world.
Just over two months ago, a Blackstone-managed fund purchased a portfolio of Japanese warehouses, including online shopping giant Amazon’s Greater Tokyo distribution centre, from Mapletree-sponsored private equity real estate fund MJLD for JPY 100 billion. Just this past week Blackstone furthered its warehouse bets with an agreement to purchase a $5.9 billion US logistics portfolio from Colony Capital.
Allianz Increases Its Asia Footprint
Allianz’ foray into Japan’s residential sector comes after the insurance titan has made itself one of the leading international real estate investors in India, Southeast Asia and Greater China since Desai was appointed to lead the company’s APAC efforts in late 2016.
In August, Allianz entered India’s office market with an agreement to invest $150 million in an office development platform set up by the country’s Godrej Group as the firm adds more Asian properties to the its €67.1 billion in real estate assets under management worldwide.
Four months ago, the insurer backed one of the largest Singapore acquisitions this year when it took a 60 stake in the S$1.5 billion purchae of the DUO Tower office building and the DUO Galleria mall, with Gaw Capital Partners taking the remaining 40 percent on behalf of an unnamed sovereign wealth fund.
In May, Allianz committed S$600 million ($435 million) to GLP logistics funds targetting projects in China and Japan.