AXA IM ALTS Picks Up 33 Japanese Apartment Buildings for $459M

French fund manager AXA IM Alts has boosted its multifamily holdings in Japan with the acquisition of a 33-property apartment portfolio across Tokyo, Greater Osaka, and Nagoya for about €420 million ($459 million).

The 2,141-unit portfolio is made up of recently constructed residential buildings containing mostly one-bedroom apartments, and was 92.5 percent occupied as of June 2022, according to marketing materials viewed by Mingtiandi. JLL and Mizuho Trust & Banking advised on the transaction.

In a statement, AXA IM Alts indicated that it believes the residential assets are supported by strong demographic drivers, noting that the three cities enjoy continuous population inflow despite Japan’s shrinking population and that the properties are located in each city’s most popular and well-connected submarkets.

With over €188 billion of assets under management, the alternative investment arm of AXA Investment Managers is a prolific buyer of Japanese real estate. The latest acquisition builds on the company’s Japanese residential exposure of about 7,800 units as global investors continue to be drawn to multifamily assets in Asia’s second-largest economy.

High Occupancy

“This transaction further extends our residential footprint in three of Japan’s most densely populated cities, where demand for high quality rental accommodation exceeds current supply,” noted Laurent Jacquemin, head of Asia Pacific real estate at AXA IM Alts in a statement.

“All the properties in the portfolio have a strong track record of high occupancy and proven appeals to the respective cities’ thriving professional communities,” he added.

Sources familiar with the transaction identified the seller as a unit of US banking giant a JP Morgan.

The portfolio spans a total net leasable area of 62,853 square metres (676,544 square feet), including 10 properties with 440 units in Tokyo totalling 14,148 square metres; 18 properties in Osaka with 1,280 units totalling 37,716 square metres; and five properties in Nagoya with 421 units totalling 10,989 square metres.

The properties had an average age of 2.58 years as of mid-2022. Fourteen of the properties have been awarded the Development Bank of Japan’s DBJ Green Building Certification. All of the buildings are located close to a train or subway station, with an average walking distance of 5-7 minutes.

“The relative cash returns and stability of income continue to attract global investors to the Japan multifamily sector,” said Stuart Crow, CEO of Asia Pacific capital markets for JLL in a statement to Mingtiandi. “We are seeing consistent inflows of new foreign investors seeking exposure to the sector and expect this trend to continue.”

Japanese Apartments Heat Up

AXA IM Alts, which had around €90 billion in real estate investments as of September 2022, has been among the most active cross-border investors in Japan’s multifamily properties and other real estate assets.

News of the company’s first Japanese deal of the year comes after AXA IM Alts announced in September 2022 it had picked up two residential portfolios in the country totalling €423 million in value, including 29 multifamily residential properties and four student housing assets across Greater Tokyo and Osaka.

Earlier in the year, the company said it had acquired a pair of rental residential properties in Tokyo with a total of 158 homes for JPY 6.9 billion ($54 million). The investment firm also paid JPY 10.6 billion ($94 million) for a pair of Osaka residential properties in October 2021, after scooping up two apartment buildings in the northern city of Sendai for JPY 4.2 billion ($38.6 million).

These transactions followed a series of residential acquisitions in 2020 by AXA IM Alts, which also demonstrated an interest in senior housing by purchasing a portfolio of 15 nursing homes in Tokyo, Osaka and Aichi for €156 million in a deal announced last December.

AXA IM Alts is joined by a flock of overseas investors that are betting on Japan’s multifamily sector. US real estate giant Hines made its debut in the market last December, buying 11 apartment buildings with more than 400 units in Tokyo, Nagoya and Fukuoka on behalf of its flagship pan-Asian fund.

A month prior to that, German asset manager Patrizia announced the launch of a €1 billion Japan-focused fund to acquire core and value-add multi-family assets across the country’s top cities.

And in October 2022, Singapore’s TE Capital Partners closed on a $100 million purchase of 16 rental apartment properties in Tokyo, to name another recent deal among a flurry of cross-border transactions in the space.