Smelly apartments and foreign tenants: How Fortress became Japan’s biggest landlord

In late 2017, Fortress Investment Group was acquired by Japanese conglomerate SoftBank for $3.3 billion. Around the same time, Fortress was making big moves in Japan.

The New York-based private equity firm is now Japan’s largest private apartment owner, after picking up 100,000 affordable housing units from the Japanese government for $553 million in 2017, according to the Wall Street Journal. The company has budgeted another $500 million for renovations, and plans to turn a profit by embracing a group often shunned by local landlords — foreign workers.

“We are seeing Japan opening its doors,” Fortress real estate head Thomas Pulley told the Journal, referring to government initiatives to bring in more foreign workers in response to a labor shortage and demographic decline.

The properties Fortress acquired were mostly poorly maintained apartment blocks on the outskirts of big cities, which were built during the economic boom of the 1960s and ’70s. The overall occupancy rate of the units was just 33 percent when Fortress acquired them; it is now up to 56 percent.

Many of the newly-acquired apartments “kind of smelled, to say the least,” Pulley said.

While local landlords and brokers often reject foreign tenants out of hand – ostensibly due to concerns about language, or trash categorization – around 20 to 25 percent of Fortress’ new tenants are non-Japanese.

The firm has also done away with security deposits and other fees, which traditionally add up to as much as four months’ rent, lowering the bar of entry for foreigners and low-income tenants. [WSJ] — Kevin Sun