Wednesday, October 05, 2005

Rolling It In

Pacific Management Corp. announced a 100-billion-yen private-pool discretionary fund, to close in early 2006. The fund collected 9.4 billion in equity by the end of August for a seed portfolio of 20 billion yen, investing in small value-add assets and also bulk properties from the public sector. PMC is the sponsor of the Japan Residential REIT and also has three other funds investing in prime office, city retail, and small residential properties. Separately, PMC also announced a golf course fund which will invest 30 billion yen in five to ten properties by November 2006. Already, on October 1 it acquired the recently-bankrupt Higashi Karuizawa golf club company for 1 billion yen.

Heavyweight Tokyo Tatemono is offering smaller investors (from 5 million yen) a chance to buy preferred equity in the 10-billion yen Apartments Shinonome rental condos in Tokyo (2005). The scheme, which gives a dividend yield of 2.6% plus 2% of post-AM fee cashflow for five years, is the fifth such securitization by the company, who will also guarantee the investors’ investment - unlike REIT shares. This time, however, the preferred portion is only 70%; the firm will keep a subordinate interest of 30% and a 98% claim on cashflow after asset management fees. While To-Tate admits that the investors’ money is, in effect, a ‘loan’ with unattractive rates, the long-term aim is to develop the small-investor market, which may pay off in the long run for them.

Meanwhile, Macquarie Global Property Advisors, raised $1.3 billion of equity for the MGP Fund II, which plans to invest as much as $5 billion. They bought a 32-story residential tower in Nishi-Ikebukuro - currently under development - and a 10-story office block in Kameido, east Tokyo (a ‘buy, fix and sell’ play, says Simon Treacy) for a total of 24.7 billion yen.

Secured Capital Japan plans to set up its first corporate buyout fund, targeting real-estate-rich distressed companies, by the end of next January. The fund will acquire about 30-40 billion yen, of which the equity investment wil be about 15 billion yen (40% from the firm and the remainder to come from domestic institutional investors). Separately, Secured also announced it would establish a 10 billion yen fund investing in low-rated CMBSs and mid-risk mezzanine loans.

Lastly, in a recent interview with the Nikkei, Risa Partners CEO Atsushi Imuta says that business is fine, partly because demand is high for stabilized office buildings in Tokyo. Their office fund is selling a few of them right now, and Risa also securitized a retail development in Fukuoka (Jasmac Shuko Koji), netting about 1.8 billion yen – the first in a series of retail properties in cooperation with Jasmac. The company also saw a fivefold (!) increase in assets which they manage for George Soros’s Soros Real Estate Investors (more info here), from 20 billion yen in December 2004 to 100 billion this year. Soros has 80%, Risa 16%, and Mr. Imuta 4% of the fund (Risa is also partly owned by Soros). The joint fund has so far bought, among other assets, four large retail buildings in Shinjuku. Risa also has a collaboration with leading Tokyo interiors company Idee called R-Project, which personally I find most interesting: renovating old buildings and converting them to designer apartments.

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