Aberdeen, Sumitomo Form Venture to Invest in Asia Pacific Real Estate

The firms said they would incorporate ESG factors into the investment process.

Aberdeen Standard Investments, the investment arm of Standard Life Aberdeen, and Japan’s Sumitomo Mitsui Trust Bank, have formed a joint venture that will invest in residential real estate in Japan and other mature markets in the Asia Pacific region.

Through co-investment and co-management by Aberdeen Standard Investments, and Sumitomo subsidiary Sumitomo Mitsui Trust Real Estate Investment Management, the joint venture will target investments in residential assets such as multi-family, senior housing, student housing, and corporate housing. Financial terms of the deal were not disclosed.

“Over the next decade, cities in the Asian Pacific region are set to experience very strong growth, fuelled by both domestic and foreign immigration to major metropolises, which bode well for housing demand over the medium-term,” Kang Puay Ju, ASI’s head of real estate in Asia Pacific, said in a statement.

The firms said the joint venture would adopt a value-added investment strategy and is looking to acquire newly constructed properties on a forward commitment basis, as well as older residential properties, which have the potential to be renovated, repositioned, or converted. According to Sumitomo, the volume of transactions of existing homes in Japan accounts for a relatively small share of the overall market compared to Western countries. However, the market for the renovation of existing homes is expected to grow and become increasingly active in the future. 

The joint venture’s strategy also hopes to take advantage of the continued trend toward urbanization in Japan and other countries in the region, especially in large cities such as Tokyo and Osaka, as well as the significant rental and yield gaps between new and older buildings.

Environmental, social, and governance (ESG) factors also will be “fully embedded” into the investment process, the companies said, with the goal of supporting sustainable social development through ESG-screened investments in Japan.

Sumitomo Mitsui Trust Bank will make certain equity contributions, while Sumitomo Mitsui Real Estate Investment Management will provide asset management services for the properties located in Japan. The bank, through the operation and management of the joint venture, will contribute to the development and promotion of the residential sales market in Japan.

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