Alyssa Partners, Gaw Capital Buy 29 Tokyo Apartment Buildings for Estimated $259M

Alyssa Partners and Gaw Capital Partners have acquired a portfolio of 29 Tokyo apartment buildings from a major Japanese conglomerate, according to an announcement on Friday, with the purchase of 835 homes representing the country’s largest trade of rental residential assets so far this year.

Hong Kong fund manager Gaw Capital is investing in the deal on behalf of separate accounts for the Qatar Investment Authority and other investors, with Tokyo-based Alyssa taking a minority stake in the deal, which represents its largest residential transaction to date.

With the portfolio spanning approximately 30,000 square metres (323,000 square feet) of space in prime locations across the Japanese capital, market analysts estimate the transaction value at approximately JPY 40 billion ($259 million), with the deal surpassing M&G Real Estate’s JPY 30 billion January purchase of a Shinjuku apartment tower as the country’s biggest rental residential acquisition so far this year. Gaw Capital and Alyssa did not specify an investment amount or name the seller of the assets.

“We are delighted to team up with Gaw Capital Partners on this sizable transaction and with whom we share similar strong convictions about the multi-family market in Japan,” said Chedli Boujellabia, managing partner, chief executive and Co-CIO of Alyssa Partners said in a statement. “This latest portfolio acquisition is re-enforcing Alyssa Partners’ leading position as one of the most active investors in the Japanese multifamily sector with a current residential portfolio of circa JPY 140 billion in more than 100 properties and circa 5,000 apartment units across the major Japanese metropolitan cities.”

Tokyo Apartment Targets

The apartment properties average less than three years in age and an average walking distance from subway or JR Rail stations of less than five minutes, with Gaw Capital describing the investment as a vote of confidence in Japan’s rental housing market.

“We believe in the long-term prospects of Japan’s residential sector and the resilience of its housing market,” said Isabella Lo, a managing director at Gaw Capital who serves as principal for investments and head of Japan for the company. She added that, “The acquisition of these well-located and high-quality multifamily properties further enables us to leverage our expertise in enhancing the value and appeal of the properties and creating exceptional living spaces that meet the evolving needs of residents.”

Market sources identified the source of the assets as a pair of portfolios, including a set of 16 assets held by developer and fund manager Kasumigaseki together with Mitsui & Co Digital Asset Management, a unit of the Japanese conglomerate which allows retail investors to participate in direct real estate investments through a tokenisation platform.

A second 13-asset portfolio also is believed to have been sourced from Mitsui & Co Digital Asset Management, with property registry records for the assets in the portfolios having been updated within the last 30 days.

For Gaw Capital, the deal comes less than two years after the company headed by Goodwin Gaw purchased 32 Japanese apartment properties on behalf of the Qatar Investment Authority (QIA), in what was positioned as the start of a larger initiative in Japan’s rental residential industry.

At the time of that May 2022 acquisition, Gaw Capital stressed the resiliency of Japanese residential rents during unfavorable market conditions and rising leasing rates in the country’s major cities while also pointing to the liquidity of the real estate market in Asia’s second largest economy.

While Japan’s rental residential investments are still dominated by domestic players, global institutions have been playing a larger role this year with a Tokyo-listed REIT sponsored by KKR in February making its 12th acquisition of rental residential assets in the country with a JPY 9.5 billion deal for a set of four apartment buildings in the capital city.

Also in February, Warburg Pincus, together with apartment operator Weave Living, announced that they were establishing a $500 million fund to invest in acquiring apartments in Japan and expanding operations in the country.

Top-Ranked Players

With $367 million in acquisitions of Japanese residential properties last year, Alyssa Partners ranked second only to AXA Investment Managers among buyers of apartments in Japan for 2023, with the French giant having picked up $456 million in rental homes.

In December, Alyssa had teamed up with Japanese insurer Dai-Ichi Life to acquire a portfolio of 12 rental apartment buildings across the cities of Tokyo, Osaka, Nagoya and Kobe for JPY 20 billion ($140.4 million).

That deal was revealed less than a month after the company, together with Invesco Real Estate, announced their joint acquisition of 15 apartment houses in Tokyo, Osaka, Nagoya and Fukuoka with a total of 1,258 units, with that deal said to total JPY 30 billion.

Gaw Capital has been ramping up its presence in Japan, including announcing a deal with data centre operator GDS earlier this month to complete and operate a 40-megawatt facility west of Tokyo.

The private equity shop has also been active in Japan’s commercial sector, including teaming up with KKR in March last year to purchase the Hyatt Regency Tokyo for over $409 milliion. In December 2022, Gaw Capital bought a portfolio of Greater Tokyo logistics assets from Blackstone.