Ascott Residence Trust (ART) will invest about JPY 10.4 billion[1] (S$125.0 million[2]) to acquire four rental housing properties and its first student accommodation property in Japan. The yield-accretive acquisitions are set to increase ART’s pro forma FY 2021 Distribution per Stapled Security by approximately 1.7%[3]. The average NOI yield[4] is expected to be about 4.0%. The five properties will be acquired on a turnkey basis from two different sellers on a willing buyer and willing seller basis. The transactions are expected to be completed between 1Q 2022 and 2Q 2023.

With these latest acquisitions, ART has invested about S$905 million in longer-stay properties since January 2021. The acquisitions of the five freehold rental housing and student accommodation properties will increase ART’s longer-stay properties to 17% of its total portfolio value. ART is on track to meet its medium-term target of 25-30% for its longer-stay properties, strengthening the resilience of ART’s portfolio.

Three of the rental housing properties are located in Central Osaka, the economic and logistics centre of Japan while one rental housing property is located in Fukuoka, one of the fastest growing cities in the country. The student accommodation property in Osaka serves the main campus of Kindai University (KU), which is just a two-minute walk away. KU has over 30,000 undergraduate students.

Ms Beh Siew Kim, Chief Executive Officer of Ascott Residence Trust Management Limited and Ascott Business Trust Management Pte. Ltd. (the Managers of ART) said: “ART continues to build up our longer-stay portfolio to boost income stability. Post-acquisition, on a pro forma basis, ART’s longer-stay properties are expected to contribute 17% to gross profit, up from 15% in FY 2021. As the five properties will be acquired on a turnkey basis, there is no development risk. Minimal down payment is required, and majority of the payment will be made upon completion of the transactions. We remain committed to delivering sustainable, long-term value to our Stapled Securityholders.”

“The addition of four more rental housing properties will boost the overall resilience of our portfolio. Leases for the four properties are about two years in length, providing better visibility and stability in future cashflows. ART’s existing rental housing properties in Japan have achieved a strong average occupancy rate of over 95% in 2021 despite COVID-19. The three rental housing properties in Sapporo[5] have performed well since our acquisition in June 2021. We expect the four new rental housing properties to perform strongly too. Our first student accommodation property in Japan adds to our quality portfolio of eight student accommodation properties in the USA.  It is located close to a highly reputable university with a large student population, and there is limited competing supply. The property in Japan is under a 15-year master lease with the largest student accommodation operator in the country, generating stable income for ART,” added Ms Beh.

Expanding ART’s rental housing portfolio in Osaka

The acquisitions of the three rental housing properties will entrench ART’s presence in Osaka.  Osaka is Japan’s third most populated prefecture with a population of 8.8 million. Its population has grown steadily since 2017 with a net positive migration. Osaka’s central wards, where ART’s acquisitions are located, are expected to have close to double-digit population growth between 2020 and 2030, fueled by the city’s expanding employment opportunities[6]. Given the positive demand-supply dynamics, rental rates in Osaka have been increasing since 2009[7], and are forecasted to remain on an upward trend, especially with the full resumption of economic activities post COVID-19.

The three rental housing properties are Bentencho 5chome, Nakatsu 4chome and Sagisu 5chome. They will offer 120, 70 and 108 studio units respectively. The three properties will be managed by third-party operators when they open.

The three properties are located within walking distance to the Osaka’s public transportation network as well as commercial, retail and entertainment options. From Bentencho 5chome, the Bentencho metro station is about a 10-minute walk away. The property is a five-minute walk to the Osaka Bay Tower, an integrated development with retail, commercial and hospitality components. Bentencho 5chome is also about a 15-minute drive to Universal Studios Japan and a 20-minute drive to the Port of Osaka.

From Nakatsu 4chome, it is a six-minute walk to Nakatsu metro station. It is also a 15-minute walk to the city’s main Osaka metro and regional train stations, as well as the city’s central business district (CBD). Umeda Sky Building, a popular retail destination, is also about a 12-minute walk away.

Sagisu 5chome is located about an 11-minute walk to the Fukushima metro station and is just one stop to the city’s main Osaka metro station and the CBD. Around the Fukushima metro station are several commercial and retail shops.

ART’s first student accommodation property in Japan

ART’s first student accommodation property in Japan is Eslead College Gate Kindaimae. The property is under a 15-year master lease with a fixed monthly rent. It will be managed by a major student accommodation operator in Japan. Located in Osaka, the property comprises 112 studio apartments. It is a 15-minute walk to the Nagase railway station and is close to the Manabiya shopping street.

Eslead College Gate Kindaimae serves KU which is Osaka’s second ranked private university and also ranked amongst the top 5% of universities globally. Founded in 1925, KU is one of Japan’s largest universities with the fourth highest enrolment in Japan, and the highest in the city[8]. In Japan, 95% of university students are local students and the proportion of female students has also increased, driving the demand for secure and well-managed student accommodation properties.

Growing ART’s rental housing portfolio in Fukuoka

The rental housing property located in Hakata, Fukuoka will offer 247 units, providing a mix of studio and one-bedroom apartments with waterfront views. The rental housing property is expected to perform well with rental rates in the city increasing consecutively from 2011 to 2020 and have remained robust. Supply is also expected to remain low in the next few years[9]. Fukuoka is Japan’s fastest growing city with a total population of 1.6 million. Positioned as Japan’s Silicon Valley, Fukuoka has a pro-business environment with many start-ups and has one of the youngest populations in Japan.

From the property, residents can visit the Hakata waterfront, just eight minutes away on foot. The nearest bus station is a minute’s walk from the property, while the nearest subway station is an 11-minute walk away, enabling residents to easily access the city’s commercial and entertainment district in Tenjin or the CBD in Hakata. There are supermarkets and hospitals nearby and the Fukuoka Airport is a 20-minute drive away. The rental housing property will be managed by a third-party operator when it opens.

ART’s portfolio in Japan

With the five acquisitions, ART has a total of 2,500 units across 19 rental housing and student accommodation properties in Japan. They are strategically located across five cities, namely Tokyo, Fukuoka, Hiroshima, Osaka and Sapporo. ART also has over 2,600 units across 8 serviced residences and hotels in Tokyo, Kyoto and Osaka.

Annex – About the new acquisitions in Japan 

  Rental Housing Student Accommodation
Property[10] Bentencho 5chome Nakatsu 4chome Sagisu 5chome Hakata Property Eslead College Gate Kindaimae
Estimated Deal Completion Time 4Q 2022 4Q 2022 1Q 2023 2Q 2023 1Q 2022
Land Tenure Freehold Freehold Freehold Freehold Freehold
Net Leasable Area 3,076 square metre (sqm) 1,495 sqm 2,331 sqm 6,866 sqm 2,145 sqm
Contract Type Management Contract Master lease
Building Height 13 storeys 13 storeys 10 storeys 14 storeys 7 storeys
Units and Unit Mix Studio
(120 units)
Studio
(70 units)
Studio
(108 units)
Studio
(52 units)
 
One-bedroom apartment (195 units)
 
Studio
(112 units)
Common Area Amenities 15 parking lots and 9 motorcycle lots 4 parking lots and 10 motorcycle lots 11 parking lots and 9 motorcycle lots 33 parking lots, 63 motorcycle lots and 125 bicycle parking lots
 
Cafeteria and student lounge