Global investors continue to pick up Tokyo apartments, with a JPY 10 billion ($88 million) PGIM Real Estate residential joint venture announcing a fresh acquisition this past week and local news reports revealing an apartment purchase by Blackstone in the Japanese capital.
Alyssa Partners announced on LinkedIn last week that its AP Residence One GK joint fund with PGIM Real Estate had acquired a newly-built 11-storey apartment building in Mukojima, northeast Tokyo, to add to the platform’s JPY 9.2 billion ($81 million) seed portfolio established in January of this year.
“This is a joint venture where we are the minority investor, they (PGIM) are the majority,” Chedli Boujellabia, managing partner and CEO at Alyssa Partners, said in an interview with Mingtiandi on Thursday. “We co-manage the vehicle and we structured it as a programme in the sense that we can add more assets, and we are keen to add more assets and grow that portfolio.”
The latest acquisition came shortly after Blackstone’s purchase of an 896 square metre (9,644 square foot), eight-floor rental apartment in Komagome, Toshima-ku from the real estate arm of Sony, SRE holdings, as reported by Nikkei on Friday.
“Given the attractive financing, on a cash-on-cash perspective, Japan still looks very attractive,” Boujellabia said. “So that’s why many investors are already investing or started investing in the asset class, especially in this current pandemic times where everyone’s looking for defensive assets to counterbalance the existing portfolios.”
New Tranche of Tokyo Deals
Located in the northeastern part of Tokyo and less than 10 minutes away from Oshiage rail station, the newly acquired residential property has 2,600 square metres of gross floor area spread across 70 studio and 1-bedroom apartments.
The new property will add to the four Tokyo residential buildings seeded in AP Residence One GK fund’s portfolio in January, which total some 282 units, with all of the properties within walking distance to subway stations. PGIM’s Mukojima piciup is also a close neighbour to the seven-storey Tradis Mukojima building, which was one of eight apartment assets acquired by Heitman earlier this month.
“This transaction is a further example of our ability to generate new opportunities to capitalise on the strong fundamentals of the Tokyo multi-family sector for the benefit of our investors,” Morgan Laughlin, PGIM Real Estate’s head of Japan, said when the firm made its announcement in January. “We look forward to growing our relationship with Alyssa Partners as we further expand our Japanese residential portfolio.”
More Homes on the Way
To further grow the portfolio, Boujellabia said the partners remain on the lookout for more newly built apartments, forward commitments and stabilised assets in Greater Tokyo, including the neighbouring cities of Yokohama and Kanagawa, as well as well as Osaka, where they see opportunity in strong population growth and easy access to transport networks and central business districts.
Their Mukojima addition is only a 25-minute drive from Tokyo’s Komagome neighbourhood, where Blackstone in September purchased the 27-unit Aiflat Komagome 1-Chrome apartment building from SRE Holdings for an undisclosed amount. The property is also near Japan Railway’s Komagome Station and is surrounded by schools and parks.
Blackstone has been busy closing deals in Japan since last year, making at least four major acquisitions in the last 12 months that helped push its total real estate asset holdings in the country to over $13 billion to date. Among these buys was the firm’s JPY 110 billion purchase of a Tokyo and Osaka-focused portfolio of commercial and residential properties from PAG in December of last year.
Roppongi Redevelopment with AXA
In addition to its residential partnership with PGIM, Alyssa Partners has also achieved returns in Tokyo’s commercial sector in recent months, including exiting an office project it had jointly developed with Paris-based fund manager AXA Investment Managers — Alternative Assets.
The alternative investment management arm of France’s AXA Insurance, together with Alyssa, sold the 4,000 square metre Roppongi Tower to Korean investor Daishin Securities in August, according to local media accounts, after jointly closing on the purchase of the asset in December 2018.
Alyssa had sourced the site, which was formerly two vintage buildings, and signed a lease agreement with IWG’s Spaces co-working division for the entire property prior to the construction of the new building, which began in February 2019.
After one year of knocking down the old property and preparing the ground, the developers took 18 months to construct the new building, and the exit generated a double-digit internal rate of return for their investment. Similar to its arrangement with PGIM, Alyssa maintained a minority stake in the commercial JV while AXA IM Alts held a majority interest.
The building, currently fully leased to Spaces, a co-working unit of flexible office provider IWG, is on the main street of entertainment hub Roppongi district in Minato City, across from the landmark Tokyo Midtown mixed-use complex and a minute away from the nearest subway station.
Alyssa has also worked with AXA IM Alts’ in the residential sector, including acting as an advisor on the French giant’s acquisition of two Osaka residential assets last month. In that deal, AXA IM Alts paid JPY 10.6 billion to acquire two properties from the Japanese division of PGIM Real Estate containing 346 apartments.