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.

jp bank

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.

Related Articles

General, Investors/Business
News
Japan's promised economic stimulus must be big enough to exceed the economy's output gap of about 15 trillion yen ($100 billion), a senior ruling party official said on Sunday. The remarks add to growing calls among ruling party officials for hefty spending to ease the strain from rising inflation on households. On monetary policy, Shindo said while the Bank of Japan must eventually exit ultra-easy policy, doing so now would be premature as Japan's economy and wage growth remain weak.
General, Investors/Business
Information, News
Real estate prices rose in Japan in 2022, and are expected to continue and rise in 2023. Of course, real estate prices only rise….until they don’t - but in the case of Japan, a number of factors, including inbound demand, ultra-low interest rates, higher costs of labor and construction, all but ensure that 2023 will be more of the same, as COVID restrictions are further weakened.
General, Investors/Business
Information, News
The government and the ruling coalition are planning to extend a tax break system for people who renovate their homes, sources familiar with the matter said. The home renovation tax relief is set to expire at the end of this year but government and ruling coalition officials are considering keeping it in place until the end of 2023, the sources said. The decision to extend the program is aimed at promoting sales of used homes amid a spike in vacant homes across the country.
General, Investors/Business
News
Japan's former Prime Minister Shinzo Abe, who was assassinated on Friday, July 8th, had aimed to transform and revitalize the economy. When his government took office it was faced with the daunting task of revitalizing Japan’s once dynamic economy, which was still in the shadow of the major slowdown during the so-called “lost decade” from around 1991 to 2001. Abenomics did help drive growth, though not at the pace that the country had seen during its post-war boom.