JP Bank Expands Real Estate Portfolio to $27 Billion in Ongoing Diversification Strategy

Japan Post Bank is adding more real estate to its portfolio this year as the company continues to diversify its JPY 226.3 trillion ($1.5 trillion) in assets beyond its traditional reliance on government bonds.

According to a statement issued this week, the bank’s investment portfolio includes $27 billion in real estate – up 17.6 percent from the same period a year ago and four times its 2020 holdings.

Japan Post said its sees an opportunity post-Covid to capitalise on a recovery in  prices of property assets as the firm has deployed at least $6.7 billion in capital into real estate investments since the start of 2022.

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The company, which began investing in real estate in 2016 after it began privatising 16 years ago, broadened its investment base as part of a diversification strategy, according to Norito Ikeda, president and representative executive officer at Japan Post Bank.

“Since its privatisation in 2007, Japan Post Bank has promoted a paradigm shift in its market management, moving away from its dependence on investment in Japanese government bonds,” Ikeda said in a March report. “As a result, the percentage of such risk assets as foreign corporate bonds in the investment grade area in the Bank’s portfolio has been expanding. The balance of risk assets in the strategic investments area, including private equity funds and real estate funds has also increased in recent years.”

Adding More Beds and Sheds

Real estate comprised 35.7 percent of Japan Post Bank’s portfolio as of 30 September, in line with the institution’s past investment allocations which have ranged from around 35 to 40 percent since 2021.

The company’s real estate investments achieved a net realised gain of $328.8 billion for the financial year ending 30 March, which was up 8 percent from the preceding 12 month period. From April to September of this year, the bank achieved a net gain on its real estate holdings of $60.4 million.

As of 30 September, the bulk of Japan Post’s real estate portfolio was in industrial and retail assets, comprising 33 percent and 31 percent, respectively. Offices accounted for 24 percent while retail was at 7 percent.

With only 10 percent of its property assets located in Japan, the bank had the majority of its portfolio overseas, with North America accounting for the largest chunk of its holdings at 59 percent of total assets. Europe followed as the second-largest region with 27 percent, while Australia accounted for 3 percent of its property holdings.

In a June update, Japan Post Bank reported that it had invested in Dolphin Square, an apartment complex situated in Pimlico, a riverside residential area in central London.

Japanese Investors Go Abroad

Japan Post Bank’s growing commitments to its global real estate strategy follows a trend of institutional investors from the island nation investing overseas, including Mitsubishi Estate having acquired a 46,400 square metres Sydney commercial tower for $494 million in October.

The Tokyo-based real estate company teamed up with Aussie investment firm AsheMorgan to purchase 60 Margaret Street and its MetCentre shopping centre from Blackstone and Mirvac.

Earlier this month, Japan’s Government Pension Investment Fund (GPIF) disclosed a $500 million commitment to Brookfield Strategic Real estate Partners V (BSREP V), an opportunistic real estate vehicle launched by the Canadian asset manager. This marked the second major investment by Japan pension giant this year in a global real estate investment fund after GPIF announced a $500 million commitment to Blackstone Real Estate Partners X (BREP X) in July.

In October, Japan’s largest home builder Daiwa House teamed up with Aussie construction giant LendLease in an agreement to develop two build-to-sell apartments in South London with an expected end value of $303 million. This venture marks the third joint project between the two entities after earlier JVs in Australia and the US.

A November report from data provider MSCI revealed a surge in overseas investments by Japanese investors as they deployed a total of $2.2 billion across the Asia Pacific region in the first nine months of the year, over twice as much as their previous record of $1 billion in 2018.

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