Warburg purchases Tokyo rental houses, plans Japan office

Japan Times

02-04-2025

Warburg Pincus plans to open a Tokyo office later this year as it seeks more real estate and private equity deals in Japan, adding to the expansion of foreign investors in the market.
The New York-based private equity firm, which has already been active in Japan dealmaking, said on Wednesday that it acquired a portfolio of 1,195 shared rental houses in the greater Tokyo area from Lone Star Funds. It didn't disclose the price.
"Even with the declining population overall in Japan, we feel very strongly and are confident in the growth of metropolitan Tokyo,' Takashi Murata, Warburg Pincus's co-head of Asia real estate and head of Japan, said in an interview. "It also plays into the theme of inflow of foreigners into Japan.'
Separately, Warburg also acquired an 18-story office building in Tokyo called Shinagawa Seaside West Tower, part of which it intends to reconstruct into lab space for a life sciences joint venture with Eastgate Group, Murata said.
The moves underscore a trend of increased foreign investor activity in Japan, drawn by the weak yen, cheap financing and the return of inflation to Asia's second-largest economy. Already this year, Brookfield Asset Management has said it intends to ramp up Japan investments, and Hillhouse Investment Management took a local real estate developer private.
"We're continuing to build our pipeline,' Murata said. "We're developing more relationships, we are very busy. And the team will get bigger.'
The shared rental housing portfolio is operated under the brand name Tokyo Beta and has more than 16,000 rooms with an occupancy rate of around 90%, Murata said. The deal is the first major Japan acquisition under Murata, who joined Warburg last year after a 25-year career at Goldman Sachs Group.
Share houses in Japan are lodgings with common kitchens and bathrooms, where tenants can rent a room for a short or flexible duration. The properties are popular with students, young professionals and newcomers to the country.
Lone Star acquired the debt tied to the properties in 2022 from Suruga Bank after the regional lender was embroiled in a scandal involving loans for investments in the residences based on falsified documents. Murata said that the past issues don't affect current operations of the share houses. The properties will continue to be managed by Tosei Group, according to Warburg.
Murata said he expects Warburg's real estate investments to remain centered on its broad theme of the "new economy.' The firm's Asia real estate deals have focused on rental housing, self-storage, retirement homes, logistics, labs for life science research and data centers.
Japan is attractive because there are gaps between needs and investments in certain types of property, Murata said. "Japan's real estate market has a healthy pool of local core capital and also a very healthy debt market backed by strong megabanks,' he said.
Warburg also intends to seek out chances to invest in late-stage startups and growth companies in Japan — and can take minority stakes in them, Murata said.
"With our long history and capital formation, we are very flexible in playing through the different needs of companies.'
Despite global economic risks from President Donald Trump's trade policies, as well as a path of rising interest rates in Japan, Murata sees those challenges as providing opportunities by putting pressure on Japanese corporations.
"I like the noise and the uncertainty,' he said. "That also creates more opportunity for long-term investments.'
Warburg first entered the Asia market in 1994 and has invested nearly $32 billion into more than 260 companies across the region.