Heitman Buys 8 Tokyo Multi-Family Assets in First Japan Residential Play

Heitman has entered the Japanese residential market for the first time with the acquisition of a portfolio of eight multi-family assets across Tokyo for an undisclosed amount.

The 329-unit portfolio consists of five recently completed properties and another three properties under development that are scheduled for completion by year-end, the Chicago-based real estate investment manager said Monday in a release.

The latest acquisition adds to the $6.7 billion in multi-family assets that Heitman has invested in across North America and Europe, where the firm has already built a portfolio of nearly 20,000 units.

“We are pleased to acquire this high-quality and well-located Tokyo multi-family portfolio,” said Brad Fu, who was appointed as Heitman’s head of acquisitions for Asia Pacific in February. “We are seeing strong lease-up momentum and anticipate that we will see long-term resiliency in the residential sector underpinned by sustained urbanisation and limited net new supply in Tokyo.”

Targeting Yuppies

Heitman did not name any of its newly acquired assets; however, based on photos included in the company’s press materials, Mingtiandi has identified two of the properties as projects recently developed by Global Link Management in the Sumida City special ward of northeast Tokyo.

Tradis Mukojima is a seven-storey building with units measuring 26 square metres (280 square feet) and renting for JPY 98,000-101,000 ($863-$890) a month, according to local property listings. Completed in January of this year, the property is an eight-minute walk from Oshiage railway station.

Tradis Yokogawa offers units ranging from 25 to 40 square metres and rents of JPY 93,000-156,000 a month. Completed last December, the seven-storey property sits a 12-minute walk from Oshiage station and a 10-minute walk from Tokyo Skytree railway station, so named for the nearby broadcasting and observation tower.

All eight of the acquired properties are located within a 10-minute walk of metro or rail stations and feature mostly studio apartments, Heitman said. The rental units are aimed at the growing segment of young professionals in Tokyo seeking convenience and amenities in the city.

“We identified Japan multi-family as a target for our initial global strategy’s portfolio construction due to its delinked demand drivers and cash flows less correlated to economic conditions,” said Gordon Black, senior managing director and portfolio manager at Heitman, which manages $47 billion in assets worldwide.

Work Room Needed

Heitman’s bet on projects based on modest-sized units in core locations is in some ways contrary to the latest market trends in Japan’s capital, said Johnathan Noone, vice president of capital markets at Post Lintel, a Tokyo-based real estate services firm catering to the needs of inbound institutional investors.

“Tenant demand in central Tokyo has weakened given that a certain proportion of workers — especially those in the tech industry — now work from home at least part of the time,” Noone told Mingtiandi. “Therefore these young professionals no longer feel the need to rent a small, expensive apartment near to their office.”

After portfolio transactions totalled at least JPY 128 billion in the first half of 2021, per Post Lintel figures, Japan’s residential investment market has cooled in recent months.

Most recently, France’s AXA Investment Managers announced in October that it had acquired a pair of Osaka residential assets for JPY 10.6 billion ($94 million) on behalf of clients from the Japanese division of US fund manager PGIM Real Estate. That followed AXA IM’s news in May that it would pay JPY 4.2 billion for 282 rental units in the city of Sendai.

Other large portfolio transactions in the first half included PGIM’s acquisition of six buildings across Tokyo and Yokohama for JPY 12.5 billion and LaSalle Investment Management’s purchase of nine new residential properties in Greater Tokyo for JPY 23 billion.