The world’s largest institutional investors continue to bet on Japanese rental apartments for their resilient returns, with Allianz Real Estate announcing on Friday that it had entered into an agreement to acquire a portfolio of Tokyo assets for €75 million ($89.5 million).
The purchase by the property investment arm of the global insurer brings Allianz’s acquisitions of multi-family residential assets in Japan to nearly $1.7 billion since late 2019, as the rental housing sector has grown in favour with investment managers looking for pandemic-proof property deals.
“Our existing multi-family portfolio in Japan has performed well despite the COVID-19 pandemic and this has validated our conviction about the resilience of this asset class,” said Rushabh Desai, Asia-Pacific CEO of Allianz Real Estate.
The Tokyo deal follows just two months after PGIM Real Estate, a property investment affiliate of Prudential, had agreed to spend $120 million to acquire its own set of rental housing in the Japanese capital, with the firm’s management also praising the sector’s dependable returns.
Allianz’s latest set of Tokyo homes comprises 12 newly built assets offering 7,250 square metres (78,038 square feet) of net rentable area. The assets are located within Tokyo’s 23 wards and are on average six minutes from a subway station, Allianz Real Estate said in a press release.
The properties, which include 256 homes, will be acquired upon completion and held long-term under the lease-up and stabilise strategy, in line with the firm’s focus on diversified core and manage-to-core strategies.
With Allianz having opened offices in Tokyo and Shanghai last year, Desai pointed to the company’s growing team in the region as instrumental to the ability to generate returns from newly completed properties.
“With the recruitment of new senior hires in Japan, our sourcing and asset management capabilities have been enhanced,” Desai said. “The lease-up and stabilise strategy is an example of the expansion of our capabilities.”
Stacking Up Japan Deals
This latest acquisition comes less than seven months after Allianz had agreed to buy a set of 18 newly built apartment buildings in Tokyo on behalf of its APREAP Core 1 Fund for $160 million.
Earlier, the company had acquired two sets of Japanese apartment assets on behalf of companies in the Allianz group, including spending $122 million for an 11 building Tokyo set in May of 2020, and handing over $1.2 billion for a pan-Japan portfolio in October 2019.
After the completion of the transaction announced this week, Allianz Real Estate’s multi-family portfolio in Japan will encompass over 5,500 units across 120 assets and €1.5 billion in gross asset value.
The investments underline a strategy of growing exposure to multi-family assets in Japan, a sought-after asset class offering long-term stabilised yields and supported by strong urbanisation trends with limited net supply, the firm said.
Eyes on Asia
Despite the COVID-19 pandemic driving down commercial property investment across Asia Pacific by 36 percent in the first nine months of 2020, Allianz Real Estate managed to boost its APAC holdings by 16 percent during the period.
The firm had built its assets under management in the region to €6.4 billion by 30 September, and the figure reached €6.6 billion by year-end, according to Friday’s press release.
In an interview with Mingtiandi in the waning days of 2020, Desai described Allianz Real Estate’s APAC strategy as a “beds and sheds” approach, with an eye towards rental housing and logistics.
“We like the residential space globally,” Desai said then, noting Japan’s uniqueness in the region for systematically offering residential for rent. He added that the segment had also begun to develop in China and Australia.
In an interview with Mingtiandi in January, PGIM’s regional leadership also identified rental apartment investments as a priority, with a focus on Tokyo’s dependable returns.
“Multi-family is a priority sector for us because it’s very resilient, and we have been investing in multi-family for many years in Japan through our different strategies,” said the company’s head of Asia Pacific, Benett Theseira.