Singapore’s TE Capital Makes $100M Tokyo Rental Residential Buy

Singapore’s TE Capital Partners has agreed to pay $100 million to acquire a set of 16 Tokyo rental residential properties on behalf of a family office client, as Japan’s multi-family sector continues to win favour with investors.

TE Capital, which announced the deal last week, is acquiring the properties, which include more than 400 units, on behalf of a family office client, according to sources familiar with the transaction who spoke with Mingtiandi.

With TE Capital, a private equity real estate firm founded by members of the family behind Singaporean developer Tong Eng Group, having taken a majority stake in local asset manager Tokyo Trust Capital after a pair of earlier Japanese residential acquisitions, the company has made its latest deal by acquiring a pair of separate portfolios currently under construction in the capital.

“The assets will be acquired upon completion and Tokyo Trust Capital as the asset manager will lease-up and stabilise the assets as part of the business strategy,” TE Capital said in a statement.

First Japan Foray

Colliers, which advised the buyer in the cross-border deal, confirmed the $100 million pricing in a press release, while indicating that the investor was making the purchase as its first foray into Japan’s real estate market.

The properties are being acquired from Japanese developers on a forward purchase basis, Colliers said, with construction set to be complete in the next 6 to 18 months.

“With this transaction, we’re bringing a new source of capital to the market and demonstrating the strength of family office capital to execute transactions typically pursued by institutional buyers,” John Howald, executive director and head of international capital for Asia Pacific of Colliers, told Mingtiandi.

While neither TE Capital nor Colliers identified the sellers, sources familiar with the transaction told Mingtiandi that ten of the 16 properties are being acquired from Tokyo-listed real estate developer Shin-Nihon Tatemono Co. Ltd, while a separate private company provided the six remaining assets.

A press release published by Shin-Nihon Tatemono earlier this month, the developer said it decided to sell ten condominium buildings under its Renaissance Court brand in a single transaction after it received an offer from institutional investors at a high valuation. The developer attributed the purchase to the properties’ potential to generate income in addition to maintaining their value over the long term.

Connected Locations

Together, the 16 buildings span a net lettable area of 11,560 square metres (124,431 square feet), according to Colliers. Of the more than 400 units, 250 will come from the Shin-Nihon Tatemono portfolio, according to the Japanese firm’s press release.

At the $100 million purchase price the buyer is paying the equivalent of $8,650 per square metre, with the assets expected to provide a yield in the low 3 percent-range, a source familiar with the transaction told Mingtiandi.

All of the properties are located in urban Tokyo’s 23 wards and are within an average six minutes walking distance from the nearest train station, said TE Capital.

“We’ve seen a trend of overseas private investors becoming more active in the Japanese real estate market. Historically this buyer profile has preferred indirect investment through funds, however they now desire to invest directly as they become more sophisticated,” said Colliers’ Howald.

“These private investors are able to take advantage of rapid shifts in currency markets while some institutional investors have become more cautious. They also have the advantage of a longer time horizon for their investments, seeking to grow generational wealth ahead of inflation,” Howald added.

From a risk adjusted return perspective, multi-family residential was Tokyo’s best performing asset class through the Covid-19 pandemic, outperforming Grade A office assets, according to Colliers’ research.

Rental Residential Rebound

The TE Capital acquisition marks the latest burst of activity in Japan’s rental housing sector as investors have continued to look for opportunities in Asia’s largest multi-family market.

In December of 2020 TE Capital Partners had purchased three multi-family assets in central Tokyo for $50 million, then in July of last year the firm went for a second go-around, snatching up a 175-unit collection comprising three assets in Tokyo for $60 million.

In May of this year, Hong Kong private equity shop Gaw Capital Partners acquired a portfolio of multi-family assets in Japan on behalf of the Qatar Investment Authority, and during that same month Blackstone and independent asset manager Alyssa Partners acquired a portfolio of 19 multifamily assets across four key Japanese cities for $157 million.

Last month, AXA IM Alts, a prolific investor in Japanese real estate, revisited the theme in a bold way with the acquisition of two residential portfolios totalling €423 million ($418 million) in value.