Japan’s DBJ: Targeting Europe and direct property

The Japanese financial institution has started internal discussions about shifting its overseas real estate focus from the US to Europe.  

The Development Bank of Japan (DBJ) is now looking at potential real estate investment opportunities in Europe after years of investing in the US market, according to Hayato Tsuji, real estate director at the Japanese financial institution.

“The market cycle differs from region to region. Since returns from US investments are declining as compared to previous years, it has become more reasonable to make investments in the UK and elsewhere in Europe now,” Tsuji said at PERE’s annual real estate conference held in Tokyo last week.

Speaking about DBJ’s global alternatives push, he said that the group started making overseas investments in 2012. On the back of the introduction of negative interest rates in Japan early last year, DBJ is now planning to increase its allocation to overseas real estate.

Tsuji told PERE that DBJ plans to eventually allocate 20 percent of its overall assets under management to overseas real estate, double from the current allocation of 10 percent.

In terms of investment strategy, he said DBJ would also look to invest in direct real estate, a departure from its current strategy.

DBJ is among a growing number of Japanese institutional investors looking to increase their overseas real estate exposure. However, for those who want to invest indirectly via funds, the long queues for committing capital into global open-ended core vehicles are a key entry barrier, according to some panelists who spoke at the conference.

“DBJ has mainly invested via commingled funds. But our ultimate goal is to go into direct real estate, and that is being discussed internally,” said Tsuji (translated from Japanese). “Many sovereign wealth funds and pension funds do club deals – we would like to go in there even though we are latecomers…”

DBJ declined to disclose its total assets under management. According to PERE data however, DBJ’s total AUM was approximately JPY 16.57 trillion ($148 billion; 125 billion), as of July this year.