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Property

Blackstone sells 80 Japan condos to Allianz for $1.2bn

German insurer sees strong rental demand in Tokyo and Osaka

Rents in Tokyo are rising as working couples seek homes near their jobs.   © Reuters

TOKYO -- German insurer Allianz is making its first large-scale property investment in Japan, spending about 130 billion yen ($1.21 billion) to buy roughly 80 rental condominiums in Tokyo and Osaka from U.S.-based Blackstone Group.

The purchase will be made by Allianz Real Estate, which seeks to expand its portfolio beyond Europe and into Asia. The properties are mainly condos in Tokyo's 23 central wards. Despite Japan's shrinking population, rents in the area are rising as working couples seek homes closer to their offices.

The real estate manager plans to keep the properties over the long term. It held assets totaling 63.5 billion euros ($69.7 billion) under management at the end of 2018.

Many investors are turning to real estate as they hunt for returns amid rock-bottom interest rates globally. Allianz expects rental demand in Japan's big cities to stay strong for some time, as more people move from rural to urban areas.

Blackstone is expected to hand over the buildings around the end of the year. The U.S. private equity firm had gradually increased its portfolio of rental condos in Japan's cities, which it saw as a growth asset. But the company is now unwinding part of this portfolio to long-term investors.

Rental condos in Japan's big cities are believed to generate returns of over 4%, due partly to low financing costs, though Allianz has given no specific forecast. Meanwhile, long rates in Japan and Europe remain in negative territory.

Other overseas investors are spending big on Japanese properties as well. U.S.-based GreenOak Real Estate bought Takeda Pharmaceutical's Osaka headquarters and other buildings for about 50 billion yen in March.

Blackstone also purchased several warehouses in Japan for over 100 billion yen, while KKR brought in specialists to accelerate investments in the country this summer.

Japanese real estate totaling 861 billion yen exchanged hands during the April-June quarter, up 60% on the year, according to property service provider CBRE. Foreign investors are expected to continue contributing to the tally.

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