PGIM Buys Greater Tokyo Multi-Family Apartment Portfolio for $120M 

One of 2020’s hottest asset classes hasn’t missed a beat in the new year, with PGIM Real Estate announcing on Thursday that it had acquired a six-building multi-family residential portfolio across Tokyo and Yokohama for $120 million.

The property investment arm of asset manager PGIM, a division of US financial giant Prudential, said in a release that 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.

“This portfolio presents an attractive investment opportunity due to its combination of strong property locations and stable in-place cash flows,” said Benett Theseira, PGIM Real Estate’s head of Asia Pacific. “Demographic drivers, including population growth in Tokyo and Yokohama and the migration of young working adults to the major cities, are fuelling demand for mid-market residential units for rent, which will support long-term growth across the portfolio.”

Small Packages

The portfolio features studio and one-bedroom units suitable for single professionals and couples seeking convenient locations within metro Tokyo. Construction for all assets was completed in 2020, and the portfolio has experienced strong leasing activity to reach stabilisation in a relatively short period, said PGIM Real Estate, which has $182.5 billion in gross assets under management and administration.

In a report released in late December, property consultancy JLL noted growing appetite for multi-family and build-to-rent investments, driven by a new generation of renters, supportive government policy changes and low interest rates undercutting residential yields in many Asia Pacific cities.

JLL identified Australia, South Korea and mainland China as markets with longer-term investment potential for the asset class. But the bulk of investment activity in multi-family assets remains in Japan, fuelled by domestic migration to Tokyo.

Morgan Laughlin, PGIM Real Estate’s head of Japan, said the asset manager has a long history of investing in the multi-family residential sector in the country.

“It has been a defensive asset class and we will leverage our deep development and asset management expertise in the sector to drive rental growth and capital appreciation, despite the COVID-19 pandemic,” he said.

Japan Leads the Way

Major acquisitions by Blackstone, Allianz Insurance and AXA Investment Management helped Japan tally $4.9 billion in rental apartment investments in the first half of 2020, according to research by property data provider Real Capital Analytics.

The flood of cash into Japanese multi-family assets helped push investments in rental apartments across APAC to $6.5 billion in the half — a 157 percent increase compared with the same period in 2019.

The wave reached a milestone last February with US private equity group Blackstone’s $2.7 billion deal to buy back a portfolio of Japanese apartments from Anbang Insurance which it had sold to the mainland Chinese firm three years earlier.

In March, Nuveen Real Estate announced its $140 million purchase of ten residential properties in Tokyo and Osaka on behalf of its open-ended Asia Pacific Cities fund from Hong Kong fund manager PAG.

In May, Allianz Real Estate acquired a portfolio of Tokyo-area rental apartment properties for $122 million just weeks after opening an office in the city. Three months later, Allianz said it would spend $160 million to acquire 18 newly built apartment buildings in Tokyo on behalf of its APREAP Core 1 Fund.

In July, the real estate fund management division of French insurance giant AXA announced its purchase of a residential complex in Nagoya for $186 million, calling it the company’s largest residential investment ever in Japan.