US apartment developer and operator Greystar Real Estate Partners announced late yesterday that a joint venture platform it established last year with a unit of Australia’s Macquarie Group had reached a $450 million first close of its first Asia rental housing fund with support from a pair of European fund managers.
South Carolina-based Greystar, which set up Greystar Asia Pacific last year in partnership with MIRA Real Estate, a division of Australia’s Macquarie Infrastructure and Real Assets (MIRA) reached the funding milestone through new agreements with Dutch fund managers APG Asset Management NV and Bouwinvest Real Estate Investors, according to an announcement from the company.
The venture by the US firm, which has approximately $26 billion in assets under management globally, and its Australian and European partners, aims to profit from the development of the multi-family rental market in China and across Asia Pacific, as an increasingly mobile professional class and rising housing prices create demand for professionally managed rental properties in the region’s growing cities.
Fund Set to Kick-Off First Project in Shanghai
Immediately following acceptance of the new capital commitments, the partnership will close on the fund’s initial investment, a property located within Shanghai’s inner ring road that Greystar aims to reposition as a rental property targetted at executives in the city.
“We are in the process of building a vertically integrated local team with specialists in development, investment and operations unique in this market. The team will be locally managed but supported by Greystar’s global team, network, and capital,” said Charles Ma, Managing Director for Greystar in China. “Our investment strategy will allow us to develop a significant rental housing pipeline in China and grow our platform to realize the tremendous opportunity we see in the region.”
This first investment, the details of which have not yet been disclosed, fits into what Greystar says is the fund’s objectives of investing in high-quality assets in top-tier Chinese markets. The new partners are initially focusing on Shanghai, owing to the city’s attractive rental housing supply and demand fundamentals, according to Greystar, which set up offices in the mainland commercial hub in 2017.
“China is an extraordinarily compelling growth market for rental housing investment today and is notably lacking in quality housing for the wave of renter demand driven by the rapid growth of urban market populations and incomes,” Wes Fuller, leader of Greystar’s global Investment Management business said in a statement.
Jumping into a Fast-Growing Sector
Greystar established its Asia-Pacific rental housing platform with MIRA Real Estate as mainland authorities have been supporting the rental housing market by favouring multi-family projects in land sales and working to establish rental-friendly regulatory and financing conditions.
Over the past two years some of the world’s largest private equity firms and pension fund managers have jumped into the mainland rental housing market in response to the maturing market and policy support.
Warburg Pincus has backed both Nova Properties, a rental developer which has significant investment from Singapore’s GIC, and Mofang, a leasing platform that focuses on management. Canada’s CPPIB has gone directly into the sector through a $817 million partnership with developer Longfor Group and Hong Kong’s Gaw Capital Partners last year teamed with Shanghai-based Harbour Apartments in setting up a $2.6 billion rental housing fund of their own.
Greystar Finds Experienced Partners
In teaming with APG, Bouwinvest and MIRA, Greystar, which is among the largest multi-family developers and managers globally, is making its first play in Asia Pacific with investors that are already deeply involved in the region.
“APG is already a long-term investor in rented residential strategies in both Europe and the U.S. We expect this sector to establish itself very quickly as an institutional asset class throughout Asia-Pacific,” said Graeme Torre, APG’s Head of Private Real Estate Asia-Pacific. “Partnering with Greystar and Macquarie at the platform level provides the ability for us to consider the sector on a regional basis.
As of October 2018 the Amsterdam-based pension fund manager was responsible for €471 billion ($532.2 billion) in assets for over 25,000 employers. APG has a history of investing some of this capital in Asian real estate including a significant stake in warehouse developer ESR, as well as investments with Shanghai-based developer Chongbang Group and investing $175 million in a Japan multi-family venture with UBS in December last year.
Bouwinvest, which has €778 million in Asia Pacific real estate assets under management according to its website, has a history of backing multi-family schemes, having joined TH Real Estate (now Nuveen Real Estate) and Kenedix in setting up a $1 billion Tokyo multi-family fund in May last year, and then investing around $150 million in multi-family projects in New York and Los Angeles in August of 2018.
“Bouwinvest has extensive experience investing in and managing rental housing, both through our flagship fund in the Netherlands and our international investments globally, Tjarko Edzes, Director for Asia-Pacific Investments for Bouwinvest said. “This investment in the China multifamily sector builds on that track record and is highly complementary to our recent investment in a rental housing portfolio in central Tokyo.”
Now the new partners say that they will work together to establish the “pre-eminent, vertically integrated owner, developer, and operator of rental housing in Asia-Pacific.”