A joint venture between Asian serviced rental housing provider Dash Living and British investment manager Schroders has acquired the Palms Ryogoku, a 49-key multi-family residential asset in Tokyo, for an undisclosed sum as its first investment.
The acquisition marks London-based Schroders’ first publicly announced acquisition in Japan since the establishment of its Japanese real estate investment business in February 2022, and Hong Kong-based Dash Living’s eleventh location in the Japanese capital.
“Japan is currently Dash Living’s fastest growing market and could become our biggest by AUM and beds over the next few years,” said Aaron Lee, founder and chief executive of Dash Living, in a release. “Our first asset together in Ryogoku is ideal for urban professionals and provides an upmarket accommodation option in an accessible and unique neighbourhood in Tokyo.”
The investment comes at a time of heightened institutional interest in Japanese residential assets driven by strong demand for rental units coupled with sound post-pandemic economic fundamentals, favourable interest rate differentials, and a weak yen.
Seeding a New Venture
Located in the riverside district of Ryogoku in Tokyo’s Sumida ward, approximately 11 kilometres northeast of Shinjuku, the seven-story property was built in 2006 and is a nine-minute walk from the Ryogoku subway station on the Toei Oedo Line. Sumida ward is home to landmarks including Tokyo SkyTree, National Sumo Stadium, and the headquarters of Asahi Group.
Described by the partners as a “strategic seed asset,” the property will be repurposed into fully-furnished long and short-stay apartments with shared facilities. Tokyo-based real estate asset manager and investor Crosspath Advisors, headed by former Blackstone executive Keigo Kuroda, will manage the property.
The partners’ shareholdings of the joint venture and the asset were not disclosed.
Schroders, which managed $923.1 billion in assets across its global strategies as of June, has identified Japan as a market for expansion of its real estate business after hiring Keisuke Kusano from JP Morgan Asset Management in February 2022 to lead its property investment efforts in the country.
“Japan is one of our focused markets in Asia, and we are pleased to partner with a regional market leader like Dash Living who is equipped with proven track-record in creating value in the living sector,” said Kusano. “Dash Living’s entrepreneurial approach resonates well with ours and we look forward to our new journey together with this acquisition as well as many more to come.”
Dashing into Japan
Founded in 2014, Dash Living manages an asset-light portfolio of serviced apartments, co-living homes, and hotels totaling over 2,000 rooms across Hong Kong, Singapore, Japan, and Sydney. Primarily catering to millennial professionals, the company offers minimum one month leases and enhances its property offerings with perks like access to co-working spaces and discounts on health, dining, and retail partners.
The operator entered Japan in 2021 and ramped up its Tokyo portfolio in July 2022 with its acquisition of IntheHood Hospitality, a local operator of hotels and apartments, through a share swap at an undisclosed valuation. That deal saw Dash Living add 100 co-living units in districts including Nihonbashi, Nippori, Otemachi, Tsukiji, Shinjuku, Meguro, and Azabu.
In addition to the eleven Tokyo locations, the company’s website also lists properties in Osaka and Kyoto. According to the release, the company has exited three Tokyo assets this year, delivering “opportunistic-level” returns for its investors.
In late 2021 Dash secured a deal with Hines to reposition the Butterfly on Prat hotel in Hong Kong’s Tsim Sha Tsui area as Dash on Prat after the US developer and fund manager acquired that property for a reported $118.6 million.
Then in 2022 Dash landed an agreement with PGIM Real Estate to manage the Travelodge Central Hollywood Hotel in Hong Kong’s Sheung Wan district as a Dash property after the Prudential affiliate acquired that hotel from a Schroders joint venture for $109 million.
Dash Living counts MindWorks, Grosvenor, Gobi Partners, Taronga Ventures, Clearmind Capital, and Chinachem among its investors.
Renting Over Buying
Global investors have flocked to Japanese residential assets over the past five years as they capitalise on the market’s stable rental income, large pool of investable assets, low financing costs, and a weak yen. Japan dominated Asia Pacific multifamily investment in the first half of 2023, accounting for $1.64 billion, or 41 percent, of all deals in the sector according to a report by consultancy JLL.
Low affordability, tight supply of new stock, and shifting preferences towards renting over buying have contributed to growing rental demand. In a 2022 survey of consumers in 21 countries by consultancy CBRE, 49 percent of respondents in Japan said they planned to rent their residence in the future, a level significantly above the 30 percent to 40 percent seen in other regions.
According to the Ministry of Land, Infrastructure, Transport, and Tourism’s National Survey on Public Awareness of Land Issues, the percentage of Japanese aspiring to own property decreased from 80 percent in 2012 to 65 percent in 2022, with the shift particularly prominent among individuals in their 20s and 30s.
Also announcing a Tokyo expansion this month is regional rental accommodation specialist Weave Living, which opened the first three of its nine new properties in the Japanese capital last week. The company led by Sachin Doshi acquired those nine assets during September for its formal market debut, after opening its Tokyo office earlier this year.
That deal comes after Hines bolstered its Japan portfolio by acquiring five multifamily assets in Tokyo and Kyoto. The Houston-based firm entered the Japanese market in December 2022 with the purchase of 11 Japanese multifamily assets as part of a planned $1 billion “living aggregation strategy.”