International real estate investment company Savills Investment Management has won two mandates to invest over half a billion dollars in Japan.
Savills Investment Management (Savills IM) has won two mandates worth a combined $600m to invest in Japanese real estate. Savills IM currently manages assets in Japan valued at more than $ 1billion.
ln 2013, it acquired Merchant Capital in Japan, giving it a presence in the country, and in 2015 it bought SEB Asset Management, which had built up a track record of Japanese investment over 10 years.
Savills IM’s first Japan fund, known as Greater Tokyo Office Fund, raised $ 82m in the first round, and has received commitments of $ 150m in subsequent closes. The fund could begin selling assets this year and Savills IM is planning to follow it up with a second vehicle.
Off Market Transactions
“One of the mandates came from an existing investor, the other is a new institution,” chief executive Justin O’Connor (pictured) told industry publication «IPE Real Estate» (paywall)
The Savills IM CEO said his firm sources 99 percent of their transactions in Japan off-market, stressing that Japan is a market where you need local people on the ground, who speak the language.
O'Connor likes offices and residential, where there is a strong and deep rental market. The cost of debt is also cheap in the country so if you buy central Tokyo, you may be able to get a 4-4.5 percent yield, and if you buy on the outskirts of Tokyo, the yield may be around 6-6.5 percent. «If you are borrowing at an all-in cost of 1 percent, that is fantastic,» O'Connor added.
Expansion in Asia-Pacific
Having opened an office in Australia last year, the firm is now increasing its capacity through recruitment. It plans to open an office in Shanghai in the first half of this year, and will then look at opening in Korea.
O’Connor also said Savills IM is on track to launch a pan-Asia core plus fund which will seek to raise between $ 300m and $ 500m to acquire assets with a gross value of around $ 1billion.
