DaVinci To Form Largest Privately Offered Real Estate Fund

August 27, 2005
DaVinci To Form Largest Privately Offered Real Estate Fund

TOKYO (Nikkei)--DaVinci Advisors KK (4314) plans to establish the country's biggest privately placed real estate fund, with assets of 1 trillion yen.

The fund will have the financial backing necessary to purchase large properties amid intensifying competition, particularly in Tokyo, for real estate assets. It will also acquire the stock of companies that use commercial establishments such as hotels as sources of income.

Slated to begin operating as early as summer 2006, it will start in November soliciting 250 billion yen in funds from companies and institutional investors at home and abroad. DaVinci is tapping mainly companies that have already invested in its other funds and expects about 50 firms to participate. DaVinci itself will inject 50 billion yen, with the remaining 700 billion yen coming from nonrecourse loans by financial institutions.

The fund will be given discretion by investors to make investment decisions and plans to purchase 70-80 office buildings, condominiums, commercial facilities and hotels, including large properties that other funds and real estate investment trusts (REITs) find difficult to handle.

In addition, it will propose improvements to properties it acquires to raise profitability.

DaVinci will manage the fund for 10 years and plans to recoup its investment by transferring properties to its other funds, REITs or other investors as well as by selling stock. It targets an internal rate of return of 25%.

Since the end of last year, DaVinci has managed funds with 400 billion yen in assets and has invested 270-280 billion yen this year. It expects to complete the acquisition of the properties by mid-2006.

(The Nihon Keizai Shimbun Saturday morning edition)