CDL ventures into Tokyo’s private rented sector with 35 billion yen investment

CITY Developments Limited (CDL) has purchased 35 billion yen (S$321.9 million) worth of interest in a portfolio of 25 residential assets in Tokyo from affiliates of US real estate investment manager BGO, or BentallGreenOak.

It marks the developer’s foray into Tokyo’s rental housing sector, as well as its largest private rented sector (PRS) transaction in Japan to date.

The 25 freehold residential properties comprise a total of 836 units, of which four are for retail use.

The assets have an average age of less than two years, and are located across the 23 city wards that make up Tokyo.

Three of the properties are in ultra-prime residential areas within Tokyo’s central five wards, said CDL on Thursday (Sep 28). 

The group added that the portfolio of 25 assets has an average committed occupancy rate of around 97 per cent, and a stable rental income.

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CDL’s latest investment brings its total PRS portfolio across Tokyo, Osaka and Yokohama to 38 assets with over 2,100 units, and an asset value of more than 70 billion yen.

With its enlarged PRS portfolio in Japan, CDL said it is now well-positioned to benefit from higher demand from accommodation. The group expects this demand to be fuelled by a recovering economy, rising wages, and a post-pandemic resurgence in net migration into Tokyo.

“Japan’s favourable interest-rate environment presents a timely and strategic opportunity for the group to expand our residential rental portfolio through a rare off-market transaction for well-performing assets,” said Sherman Kwek, group chief executive of CDL.

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He also noted that the group’s Japan residential portfolio has “remained resilient” despite economic volatility over the past few years, given its stable rental growth and occupancy of over 95 per cent.

“This investment marks the group’s entry into Tokyo’s rental housing market, enabling us to further scale up in this asset class while leveraging the sector’s strong growth potential. This move is aligned with our strategy of expanding in the global living sector to enhance our recurring income.”

Shares of CDL closed down S$0.02 or 0.3 per cent at S$6.55 on Thursday.