Composition Capital Partners has concluded two Japanese residential investment deals through its Composition Asia Fund II involving a total investment of around $40 mln (EUR 28.6 mln). The investments have different strategic approaches and provide investors with exposure to two distinct subsectors of the Japanese residential market.

In the latest deal, Composition has injected some $17 mln to become a lead investor in a fund targeting the senior living sector of the residential market. This is a growing and evolving area of the Japanese residential market, which Composition has studied over the past few years, according to founding director Erwin Stouthamer.

'If you look at the demographics of Japan and the trend for elderly people to move away from the model of staying with their kids, there are not enough nursing homes and there are huge waiting lists. The Japanese government, which financially supports this segment, has an enormous debt so there's a backlog of new developments. We believe this sector has enormous potential, also as the broader capital market has barely entered this industry.’

Composition has teamed up with an experienced Japanese real estate manager who has a sole focus on assets in this sector, he added. ‘We have put a lot of time and energy into this deal to understand the strategy, motives and strengths of the local partner, as well as the risks associated with the strategy.’

The deal follows hard on the heels of the first portfolio acquisition concluded by a joint venture established in 2010 between Composition and a Japanese asset management company. This investment involved an injection of some $22 mln. The Tokyo-based partner specializes in capital restructuring opportunities in existing income-producing residential properties in the greater Tokyo area, Stouthamer said. He added that demand for residential accommodation remained strong after the earthquake earlier this year. Ongoing restructuring in the debt markets is also leading to interesting opportunities for this strategy, he said.

Stouthamer also foresees other investment opportunities in the Japanese market, as well as in Vietnam, Malaysia, Taiwan, and second- and third-tier cities in China. 'Whilst you need to stay away from areas such as Hong Kong and primary cities in China, windows of opportunity are opening up elsewhere. We expect to finalise quite a few interesting deals in the coming year.'

Founded in 2005, Composition Capital Partners is an independent investment management boutique firm with more than US$ 800 mln (EUR 550 mln) under management. The firm has two European funds and two Asian funds with commitments to more than 25 local partners. The company has offices in Amsterdam and Hong Kong and roughly 20 staff.