Greystar Real Estate Partners has made an entry into Asia-Pacific by establishing a regional rental housing platform with Macquarie Capital. The Charleston, South Carolina-based multifamily operator’s foray comes three years after the US-focused firm made its first overseas investments in Europe and Latin America.
Through the newly-created platform called Greystar Asia-Pac, Macquarie Capital and Greystar will be raising institutional capital to acquire, develop, reposition and manage rental residential assets, with an initial focus on investing in Tokyo, Beijing, Shanghai, Sydney and Melbourne.
According to an earlier statement by Bob Faith, Greystar’s founder, the firm intends to build the leading rental residential company within the major cities of the region.
Unlike the US, the multifamily sector is less established in Asia, with the exception of Japan. According to Real Capital Analytics, there have been around $55 billion worth of multifamily transactions in Japan over the past 10 years. This is larger than the combined multifamily volumes of other markets in Asia-Pacific.
One of the reasons for the popularity of multifamily in Japan is a favorable cap rate in comparison with other sectors in the country. A September report by property consultancy JLL has estimated that cap rates in Tokyo multifamily have a 100 to 150 basis points spread over core office and retail.
Elsewhere, however, the sector has yet to emerge as a viable destination for investment capital. Nicholas Wilson, associate director for capital markets in Japan for JLL, said that in Singapore and Hong Kong, for instance, the multifamily sector is relatively established but limited mostly to the upper tier of the market with the average price of one unit around $2 million – Japan’s average price per unit could be as low as $300,000.
In markets like Australia, Wilson added that while the sector does not yet exist, many developers and real estate firms have started looking at development sites, with plans to roll out multifamily strategies.
“Private investors get quite favorable negative gearing tax treatment, and as a result, net yields have historically been lower than other sectors,” he said, citing reasons for the absence of the sector in Australia. “But the market has a well-established and growing pool of renters, so there is a growing level of demand for property aimed at this rental market as opposed to the homeowner market.”
That could be good news for Greystar as it looks to expand its multifamily business to largely untested markets in Asia.