M&G Real Estate Buys Pair of Osaka Apartment Buildings for $50M

The Asian division of M&G Real Estate has acquired two residential buildings in Osaka as part of the UK-based firm’s core property strategy for the region, becoming the latest fund manager to tap Japan’s hot multi-family market.

M&G paid $50 million for the apartment blocks, which were completed in January this year and contain 280 units. The fund manager’s residential buy was announced this past week alongside M&G’s $217 million acquisition of a 25 percent stake in an ESR warehouse facility near Tokyo.

“Japan’s logistics and residential market, particularly in key metropolitan cities remain robust and resilient with the growth of e-commerce and continued demand for high quality apartment accommodation,” said Richard van den Berg, fund manager of M&G Asia Property Fund. “These assets will refresh M&G’s Japan portfolio, extend our market share in Japan, and allow us to strengthen our portfolio to provide strong returns over the long term for our investors.”

The apartment deal is M&G’s second major purchase of Japanese multi-family assets in recent years, as global institutions increasingly target rental residential properties in Tokyo, Osaka and other major cities in Asia’s second-largest economy for their pandemic-resistant returns.

Japan’s Residential Demand

M&G’s pair of Osaka properties have achieved an occupancy rate in excess of 90 percent since completing construction, showing the strength of demand in Osaka’s residential leasing market, the company said.

The buildings are near Osaka’s busy Namba precinct and enjoy good access to amenities and public transport, said the firm, which acquired the assets on behalf of its M&G Asia Property Fund.

In a global outlook report published in November, M&G Real Estate named Japanese rental residential as one of its three strategic calls in the wake of the COVID-19 pandemic.

In praising the sector’s resilience, the investment manager’s team noted that a diversified tenant pool, increased home working and the preference for inner-city living should continue to support outperformance in Japan’s multi-family sector.

In its statement this past week, the firm hailed Japan residential’s “defensive nature” as seen throughout the COVID-19 pandemic. Occupancy rates in key regional cities remain high, it said, and long-term positive wage and job growth in Osaka is expected to support continued demand for urban residential rentals.

M&G’s previous deals in Japan include the 2018 purchase of a portfolio of residential buildings for $83.7 million, which marked the firm’s fifth acquisition in the country since the launch of its core Asia property strategy in 2006. The portfolio comprises four multi-family residential buildings in Chiba, Fukuoka and Osaka.

Funds Funnel Into Apartments

One of Asia Pacific’s hottest asset classes in 2020 has continued to attract capital investment this year as fund managers pile into Japanese residential assets.

In January, PGIM Real Estate acquired a six-building multi-family residential portfolio across Tokyo and Yokohama for $120 million. The portfolio consists of 353 residential units in newly completed residential buildings, with five of the mid-market properties in Tokyo and another in Yokohama, just south of the capital.

In March, Allianz Real Estate entered into an agreement to acquire a portfolio of 12 residential assets in Tokyo for $89.5 million. The purchase brought Allianz’s acquisitions of multi-family residential assets in Japan to nearly $1.7 billion since late 2019, including 11 rental apartment properties in Tokyo picked up for $122 million in May 2020.

Also in March this year, LaSalle Investment Management acquired nine new residential properties for its LaSalle Japan Property Fund. It paid $321 million to purchase the Greater Tokyo area multi-family residential properties, plus a warehouse facility in Osaka.