Savills IM Adding to Japan Investment Rush With New Fund

Savills Investment Management is looking to launch a second Japan investment vehicle to follow up on its Greater Tokyo Office Fund, according to a recent statement by the real estate investment specialist’s global CEO, Justin O’Connor.

The decision by Savills Investment Management comes as global investment firms pour funding into the Japanese market in response to the country’s introduction of negative interest rates earlier this year, as well as to rising perceptions of risk in other Asian markets.

SIM Gets Particular About Japan

“I see that as a particular opportunity in Japan,” O’Connor said recently in an interview with European finance publication IPE, “It is the second largest investable institutional market outside the US.”

The veteran finance executive made his remarks as his company anticipates raising around $250 million for its Greater Tokyo Office Fund by this November. Savills Investment Management reached a first close of $120 million by June of last year.

Savills Investment Management named Michael Flynn as its new chief executive for Asia Pacific late last month, as the company seems intent on ramping up its presence in the region.

J-REITs Rise as China Property Stocks Suffer

Japanese real estate shares are also on the way up, with a story in the Wall Street Journal today pointing out that shares of Japanese real estate investment trusts, or J-REITs, are trading at a premium of 35 percent over their net asset values, citing figures from the Association for Real Estate Securitization of Japan.

Many REITs in the US are currently trading at below the net asset values of the properties in their portofolios, and one of the reasons given by Chinese billionaire Wang Jianlin for seeking to privatise his Hong Kong-listed Dalian Wanda Commercial Properties is that shares in that stock are currently trading at below the net asset value of the real estate held by the company.

Japan, which introduced negative interest rates in January, has been attracting more attention from major real estate investors lured by the large stock of investment grade assets and cheap credit.

The Tokyo Stock Exchange REIT index has gained 8.5 percent so far this year, while in Hong Kong, the Hang Seng Properties Index, which measures the performance of real estate companies listed on the Hong Kong exchange, has slid by nearly 25 percent in the last year.

Invesco Invests, As Gaw Gets Ready

The Japanese focus for Savills seems to be part of an industry trend.

Today, a Japanese-listed REIT controlled by US asset management powerhouse Invesco announced that it had completed the acquisition of five properties in Japan. Under the terms of an agreement first announced in April, the Invesco REIT is paying 49.26 billion yen ($452 million) to acquire three commercial properties in Tokyo and one in each in the cities of Miyagi and Fukuoka.

More than half of that amount – 25 billion yen – is for acquiring the Shinagawa Seaside East Tower in Tokyo, a 23-storey mixed-use project that includes office, retail and hotel space.

And in May, Hong Kong-based real estate private equity house Gaw Capital announced plans to invest as much as $400 million in Japanese real estate this year. Gaw, which bought the Hyatt Regency Hotel in Osaka during 2014 now says that it plans to pursue deals in Tokyo and Nagoya, as well as look for more opportunities in Osaka.