German asset manager Patrizia has launched a €1bn ($1.03bn) fund focused on Japan to acquire core and value-added multifamily assets in the country’s major cities, according to the company’s chief executive officer for the region. .
In an interview with Mingtiandi on Monday, Patrizia Asia Pacific director Thomas Hirschvogel said the fund, which is backed by an Asian institutional investor, has already been seeded with four apartment buildings in the country’s two major cities for a combined value of 7.5 billion JPY (52 EUR). million). Hirschvogel said his firm plans to deploy the remainder of the capital in core multifamily and value-added opportunities in Tokyo and other major urban centers around the country over the next two to three years.
Following previous vehicles that targeted Japan’s largest cities Tokyo and Osaka, along with Nagoya and Fukuoka, Hirschvogel said that in terms of “deployable new capital,” this latest fund is the company’s largest in the region. The record capital raising comes as Patrizia aims to double its portfolio of real assets in Asia Pacific by 2027, with the company noting that the favorable borrowing environment in Asia’s second-largest economy is key to its focus on the country. .
“By keeping interest rates low, you have actually sustained the environment for the real estate sector in general in Japan and that makes us quite bullish on the Japanese market,” Hirschvogel said. “From a core plus space where we have most of our managed capital, we like to further develop in the core markets in Asia and that is Japan and Australia for us. Our second-tier markets are South Korea, Singapore and Hong Kong.”
Bullish in Japan
While Hirschvogel declined to reveal the identity of his investor for confidentiality reasons, he said Patrizia maintains single-digit ownership in the account and her partner owns the rest. The strategy has a useful life of seven years with a target internal rate of return of 8 to 10 percent.
“This is all residential and can have a certain amount of mixed use,” he said. “In general, we like to buy a little bit smaller assets and portfolios, so we don’t want to compete with the Japanese mega REITs in the residential space; we want to be the ones that have some advantage over these types of competitors.” Hirschvogel declined to provide further details about the seed portfolio.
The $1 billion fund builds on a series of Patrizia’s previous ventures in the Japanese residential market over the last five years. In January 2019, Patrizia took over the Tokyo-based real estate advisory and investment company. Kenzo Capital Corporation with the acquisition giving him control of the Kenzo Japan Residential Fund that the two firms had jointly established in 2017.
Kenzo’s strategy was drawn up with a maximum investment volume of €550 million and targets Greater Tokyo, Greater Osaka, Nagoya and Fukuoka with an initial seed portfolio of four apartment buildings worth €30 billion. euros.
With a pension fund and a major Frankfurt investment management and consulting firm as its two main investors, the Kenzo fund has a life of seven years and a target IRR of 8 percent. Unlike his latest Japanese fund, Kenzo’s vehicle was only available to institutional investors in Germany.
Following the launch of its new strategy, Patrizia has established its second regional hub in Singapore to further its expansion in APAC. The new office, located at 18 Robinson Road of Tuan Sing Holdings, will complement its first regional base in Hong Kong, as well as its five other locations in Tokyo, Seoul, Sydney, Canberra and Melbourne.
“We have invested about 17 percent of Patrizia’s global AUM with money from Asia Pacific and that is an important lesson that we get a lot of capital from APAC to invest globally,” he said.
With €57 billion in assets under management worldwide, the fund manager aims to double its Asia Pacific real estate and infrastructure investments by 2027. Over the same period, Patrizia aims to double its investments in Japan, where the country represents 10 percent. of its APAC portfolio with around EUR 2 billion in assets.
“A large percentage of global urbanization will occur in Asia Pacific and that is why we believe the market still has a steeper growth outlook than, say, the US or Europe,” he said. The company is also looking for investment opportunities in green infrastructure as Asia moves towards a zero carbon future.
“If you look at all the decarbonization and sustainability measures, there is a huge gap between the infrastructure investments required in the region to catch up and what is needed,” he added. “I think there will be a lot of private investment in the infrastructure space, and that extends to real estate as well.”
In addition to its Japanese strategy, Patrizia also aims to invest in expanding its Australian presence to include the residential market, particularly in the multi-family and student or senior housing segments, according to Hirschvogel.
“We have commercial real estate but we haven’t expanded into the typical multi-family space in Australia, we think that’s an area where we see growth, so we would like to expand our business into the multi-family sector in Australia,” he said, adding that the space The built-to-let facility that focuses on student apartments and senior housing is also an attractive space to enter.
Note: This story has been updated to remove a reference to Patrizia’s APAC assets under management. The company has not declared an AUM figure for the region. Mingtiandi regrets the mistake.