Savills IM Reaches $200M First Close on Japan Residential Fund

Savills Investment Management has become the latest fund manager to bet on Japan’s multi-family sector this year with the announcement of a $200 million financing round today.

The investment management affiliate of London-based Savills raised the cash to reach a first close on Japan Residential Fund II (JRF II), its first open ended core fund in Asia. Savills IM reached that threshold thanks to the backing of an unnamed global multi-manager which took a cornerstone stake in the fund, according to a company statement.

“We are delighted to have been able to achieve a first close, despite the challenging COVID market backdrop, and especially to have a quality institutional book of further demand and underpinned by such an excellent cornerstone investor,” said Alex Jeffrey, global chief executive of Savills IM.

Some of the world’s largest fund managers have turned to the stable returns provided by Japanese apartments this year, with Blackstone, France’s AXA IM, Allianz Real Estate and other players also betting on the sector as commercial assets have been buffeted by a souring business environment.

Betting on a Defensive Sector

“The defensive nature of low-risk assets such as Greater Tokyo multifamily strikes a strong chord with investors during these times of global uncertainty,” Tadaaki Kurozumi and Tom Silecchia, co-heads of Japan for Savills IM said.

The new fund focuses on opportunities in the Greater Tokyo market and has already committed to acquiring a set of nine residential assets in the area.

Savills IM, which manages assets of around €20.5 billion ($24.31 billion) globally says that the new venture seeks to capitalise on Japan’s ongoing urbanisation and demographic shifts towards smaller households, which it sees boosting demand for quality multifamily housing in Greater Tokyo and other major regional cities.

Having reached a final close of $500 million on its Japan Value Fund II commercial vehicle last year, Savills IM has originated, invested and transacted over $6 billion in Japanese deals since 2014. It now hopes to scale its new residential fund into a flagship vehicle in the Japanese market.

Japan Stays Hot Late in the Year

A jump in Japanese deals were a major factor in Asia Pacific apartment deals tripling during the first half of 2020, compared to the same period last year, according to research by JLL.

Investments such as Blackstone’s $2.7 billion purchase of a residential portfolio from China’s Anbang Insurance in February and a $140 million multifamily investment by Nuveen Real Estate in March helped drive apartment transactions in Japan to a total of $4.9 billion during from January through June.

Since that time, AXA Investment Managers followed up with a pair of residential investments in Nagoya during July and Allianz made its second Japan apartment acquisition of the year in August with a $160 million Tokyo deal.