After acquiring a portfolio of more than 5,500 rental apartments in Japan, Allianz Real Estate is launching its own multi-family investment vehicle targeting opportunities in the country, according to the company’s chief executive for Asia Pacific.
Speaking at an online event on Mingtiandi’s MTD TV platform today, Rushabh Desai said the company is aiming for $1 billion in gross asset value for the new fund and is well on its way to identifying a partner for the investment initiative.
“We have just launched a Japanese residential strategy whereby like-minded institutional investors can come and invest alongside Allianz,” Desai said. “The idea being, Allianz and one or two other like-minded investors would form a partnership to invest into Japanese residential, where we would look to go slightly up the risk curve as well and buy directly from developers, taking up leasing risk and on a selective basis doing some value-add type of strategies.”
After becoming one of the most active buyers of Asian real estate assets in recent years, Allianz Real Estate in 2020 branched out into managing third-party capital for the first time in the region, establishing a $2.3 billion partnership with South Korea’s National Pension Service (NPS).
Now the company sees the success of that venture, which targets core properties around the region, as providing support for its Japan initiative.
Follow-Up to NPS Partnership
“Last year in Asia, we set up a partnership with NPS on investing alongside Allianz, and that has worked very well for us, and we are continuing to provide diversification to Allianz and the same space for other like-minded institutions to invest in and benefit from this diversification,” Desai said. “So I think that’s something that has worked well, and we want to extend that to Japanese residential.”
Allianz Real Estate’s existing multi-family holdings in Japan are valued at more than $1.6 billion across 120 assets, as the company seeks returns from the world’s third-largest residential market.
The new venture will target Japan’s top four cities of Tokyo, Osaka, Nagoya and Fukuoka and focus on acquiring newly completed assets that could be leased-up and stabilised to hold long-term. Desai told Mingtiandi after the event that the value-add element of the new fund would look to acquire and refurbish older multi-family properties.
After establishing a permanent Tokyo office last year, Allianz added former JP Morgan Asset Management executive Daisuke Noguchi as its new head of acquisitions for Japan just this month, with the APAC chief linking the company’s ability to execute this latest strategy to this expanded presence in the Japanese capital.
Building a Track Record
Desai also pointed to the network of asset owners, operators and lenders that Allianz has built up through its string of Japanese acquisitions as helping it gain access to assets in what has become a hotly contested market for multi-family projects.
In its most recent Japan multi-family purchase, Allianz in March agreed to spend around $89.5 million to acquire 12 newly-built rental residential properties within Tokyo’s 23 wards, which added 256 homes to its portfolio.
That deal in the first quarter was the insurer’s fourth major acquisition of Japanese multi-family properties since October 2019.
Japanese Beds Gain Favour
During today’s MTD TV event, Desai was joined by three other executives experienced in Japanese rental residential properties, including Ed Boyd, a senior managing director with US multi-family developer and fund manager Greystar, who pointed to the ability to set up a variety of investment strategies targeting Japanese rental housing as enhancing the market’s appeal.
Also taking part in the one-hour session, which was sponsored by Yardi, was Joel Rothstein, chair of the Asia real estate practice for US law firm Greenberg Traurig, who noted the potential for scale in Japan’s property market as helping to attract global institutions to the country’s rental residential sector.
Ken Sakuramoto, head of equity advisory for Japan at JLL, predicted that investment in the country’s multi-family sector would continue to accelerate as the region emerges from the pandemic, after the asset class proved its ability to produce reliable cash flows despite the COVID-19 crisis.
After international institutional investors poured record amounts of capital into Japan’s multi-family sector in 2020, all four panellists predicted further growth in investment this year, with Desai saying that the strategy has become a “high conviction theme” for Allianz Real Estate, which now has more than $8 billion in assets under management across Asia Pacific.