Goldman Sachs Buys Eight-Asset Tokyo Multi-Family Portfolio for $80M

Goldman Sachs has acquired a portfolio of eight rental residential assets in Greater Tokyo for $80 million, as the Japanese capital continues to lead the region in real estate deal volume.

Goldman made the transaction via a special purpose company managed by the firm on behalf of investors, the banking giant told Mingtiandi on Friday. The seller was described as a major financial institution.

Comprising more than 500 apartment units, the eight properties have an average age of six years and cater to young professionals and couples, Goldman said. The Manhattan-based firm highlighted the portfolio’s strong tenant demand and stable occupancy and rent growth, driven by continued migration to cities and urbanisation.

“The investment is a continuation of the strategic focus Goldman Sachs has had in the sector over the past five years,” said Nikhil Reddy, head of Asia Pacific real estate at Goldman Sachs Alternatives. “Residential investment in Japan represents a high conviction strategy for Goldman Sachs, with the onset of inflation, continued urban migration and strong demand-supply fundamentals.”

Room for Rental Growth

The eight acquired properties are in central Tokyo’s Sumida, Koto and Itabashi wards and other locales in the metropolitan area, all within five minutes’ walking distance of train stations, according to Goldman.

“The residential units are currently leased below market rates, providing potential rent upside during the holding period,” the firm said.

Goldman ramped up its involvement in the sector in 2022 when its asset management arm teamed with Tokyo-based Sojitz on a joint venture seeking to acquire $300 million worth of rental residential properties in Japan during that year and up to $500 million annually thereafter.

Beyond multi-family, the global titan last year formed a consortium with Singapore’s SC Capital Partners and the Abu Dhabi Investment Authority to buy a portfolio of 27 resort hotels across Japan from property giant Daiwa House Industry for $900 million.

Earlier this year, a Goldman-managed fund bought a set of four office floors at GranTokyo South Tower from a Mitsui Fudosan-sponsored REIT for $281 million.

Selective Dealmaking

Tokyo retained its position as Asia Pacific’s most active metro for income-generating property investment in the first half of 2024, chalking up $10.1 billion in deal volume, according to MSCI’s latest Capital Trends report. In the second quarter, the city’s multi-family segment saw just under $1 billion in transactions.

Japan’s overall multi-family market has cooled moderately from its 2022 peak, with yields failing to expand in response to the Bank of Japan’s monetary tightening, the data provider said. Volume in the 12 months to June surged 57 percent year-on-year as yields fell 20 basis points.

“What the rate situation has done is make investors more selective about the assets they acquire,” the report said. “Appetite for large portfolio deals has waned, even as single asset deals remain buoyant.”