Savills IM Adds Assets to Japan Residential Fund
Savills Investment Management has acquired or committed to acquire a further JPY 24 billion (US $218 million) of residential real estate for inclusion in its Japan Residential Fund II (JRFII).
Twenty-four of the 27 new assets are in Greater Tokyo and will form part of a portfolio that has acquired more than 1,500 units and 47,000 sqm of net rentable area through off-market transactions since launching in November 2020.
Savills IM’s latest acquisitions on behalf of JRFII closed in June 2021 and comprise 10 assets located in popular residential submarkets of central and outer Tokyo, central Osaka and central Nagoya.
Prior to this, the fund acquired 4 assets between April and May this year, located in highly sought-after districts of the 23 Ward area of Tokyo – Yoyogi-Uehara, Ikebukuro and Ikejiri-ohashi. The assets benefit from superior public transport access and their proximity to key commercial hubs.
Across the current portfolio of assets, the Savills IM team has achieved a blended stabilized entry yield of 4 per cent, despite the weighting towards more expensive Tokyo assets, and the portfolio has 92 per cent occupancy, excluding forward commitments.
The company believes Tokyo still offers attractive risk-adjusted opportunities in the residential sector, even though increased competition for assets has driven more investment elsewhere in Japan outside greater Tokyo. The Japanese capital is the largest residential rental market in the world and the city continues to benefit from migration from other regions.
Tadaaki Kurozumi, co-head of Savills IM Japan, explains: "The size and liquidity of the Tokyo residential market means it is very resilient to external shocks, as has been proven during the Global Financial Crisis and more recently during COVID-19.
"However, it is not easy to acquire well-priced assets without the ability to source off-market transactions. Our experienced team has been investing in Japan residential for more than 20 years and has the contacts and execution capabilities required to source high-quality assets at attractive prices."
Tom Silecchia, co-head of Savills IM Japan, adds: "JRFII will selectively invest outside Tokyo, but we will continue to focus on the capital, where we can acquire the best assets at compelling yields. We have a strong pipeline of high-quality acquisitions and the capacity to considerably increase the size of the fund without compromising quality."
JRFII recently received an additional US $40m capital injection from its cornerstone investor and currently has the capacity to take on new equity partners. The fund’s deal pipeline includes approximately JPY13.8 billion (US $125 million) of immediately actionable stock, with potential to bring the total gross asset value to more than JPY71 billion (US $645 million).