AXA IM Alts Buys Hokkaido Senior Housing From Goldman Sachs for $36M

AXA IM Alts, the global alternative investment arm of French insurer AXA, has purchased two senior housing properties in the northern Japanese island of Hokkaido from an affiliate of Goldman Sachs for €34 million ($36 million) on the back of growing demand for assisted living facilities in the world’s oldest population.

Totaling 331 rooms, the two facilities are located in Hokkaido and are leased to Lifeship, a regional operator of high-occupancy healthcare facilities in the region, according to AXA IM’s announcement of the deal. Lifeship’s website lists 10 properties operated by the company, with two located in Hokkaido’s capital city of Sapporo. The assets are located near local transportation infrastructure and within affluent catchment areas, AXA IM said.

The purchase of the properties from GK Japan Care Facilities, a unit of Goldman Sachs’s Japanese entity, is the alternative investment giant’s third investment in Japanese healthcare real estate since its initial foray into the sector in December of last year. At the time of that 2022 investment AXA IM Alts said it had a, “wider long-term strategy to invest into residential asset classes supported by strong demographic drivers.”

Hokkaido is Japan’s largest and northernmost prefecture and possesses the island nation’s third largest population with an estimated population 5.2 million, of which 32.5 percent are over the age of 65, according to official government statistics.

Housing for Health

The Hokkaido purchase builds on the asset manager’s April acquisition of two nursing homes totaling 170 bedrooms in the cities of Kyoto and Nishinomiya, near Osaka, for an undisclosed sum. That transaction follows the French financial services giant’s December entry into the Japanese nursing home market via an €156 million (then $164 million) acquisition of a portfolio of 15 nursing homes totaling over 800 beds located across Tokyo, Osaka, and the Nagoya area.

AXA IM has been among the most active foreign investors in Japan’s rental residential sector including buying a 33-property apartment portfolio across Tokyo, Greater Osaka, and Nagoya for about €420 million ($459 million) in February.

In 2022, the Paris-based firm acquired 29 multi-family residential properties and four student accommodation assets valued at a total of €423 million ($418 million), as well as a pair of rental residential properties in Tokyo for ¥6.9 billion ($54 million).

As of June, AXA IM Alts managed €185 billion ($201 billion) in assets globally, of which approximately €3.4 billion ($3.7 billion) were deployed in Japan.

New Angle on Rental Housing

AXA IM’s latest commitment comes as rising demand for senior housing and nursing homes in Asia’s second largest economy has caught the attention of institutional investors.

American asset manager Nuveen, along with its pension fund parent TIAA and Dutch real estate investor Bouwinvest, closed on $100 million in capital for their Japan Alternatives Living strategy fund in July 2022, which focuses on stabilised senior housing assets and while also targeting investments in student accommodation, single family, and co-living assets.

Singapore-based Parkway Life, Asia’s largest listed healthcare REIT, in October acquired two Osaka nursing homes for about S$16.4 million ($11.8 million), to bring its Japan portfolio to 59 properties totalling approximately S$710.7 million ($519.5 million) in value. That deal came after it bought seven Japanese senior living assets for $56 million in September 2022.

Parkway’s rival First REIT added to its Japan senior housing portfolio in September last year with the purchase of two properties in Kanagawa and Aichi prefectures for about S$26.3 million ($18.5 million) following its entry into the sector with the acquisition of a 12-asset Japanese portfolio in December 2021 for ¥24.2 billion ($213 million).

In addition to senior housing assets, nursing home operators have also become investment targets with Seoul-based private equity heavyweight MBK Partners paying over $300 million in February to acquire Japanese senior nursing care operator Unimat Retirement Community, following its purchase of Japan’s largest daytime care service company Tsukui in 2021 for over $350 million.

Betting on Growing Old

Investor interest in Japan’s senior housing and residential healthcare sectors comes as the nation’s median age reached 49.1 years in 2023, according to government statistics.

At present, a record high 29 percent of the country’s 125 million population is aged 65 or older, with that proportion expected to increase to 40 percent by 2070, according to a report from Japan’s National Institute of Population and Social Security Research.

Against this demographic backdrop, AXA IM Alts anticipates growing demand for senior housing properties driven by a burgeoning senior population and low stock of senior living facilities.

“This is a rare opportunity to acquire a modern and diversified portfolio of care home assets with an attractive trading history, in a fast growing but still highly fragmented use class,” Laurent Jacquemin, head of Asia-Pacific real assets, with regard to the company’s first acquisition in the sector at the time of that December deal. “Establishing long-term relationships with leading operators will allow us to quickly scale our platform, in a sector we view as highly defensive and benefitting from the tailwinds of compelling long-term demand supply dynamics.”