Kenedix to Invest $332 Million in Two New Real Estate Funds
March 17, 2010, 10:37 PM EDTBy Tomoko Yamazaki and Katsuyo Kuwako
March 18 (Bloomberg) -- Kenedix Inc., Japan’s biggest publicly traded real estate asset manager, said it will invest 30 billion yen ($332 million) in Japanese properties this year through two new funds, to take advantage of price declines.
The Tokyo-based firm is in talks with several investors including Korean pension funds to start a 10 billion yen-fund in the first half of this year, Kenedix President Atsushi Kawashima said in an interview yesterday in Tokyo. The second fund will start with about 20 billion yen by the end of the year and aims to grow to 100 billion yen within 12 months, he said.
Kenedix will use the new funds to buy Japanese commercial and office properties for the first time since the collapse of Lehman Brothers Holdings Inc. in September 2008, as credit conditions recover and a drop in property values lures investors. Average land prices in Japan’s three biggest metropolitan areas -- Tokyo, Osaka and Nagoya -- as of July 1 dropped for the first time in four years as property investments dried up amid a weakening economy and tighter credit conditions, the latest government report showed in September.
“Rents will bottom out by summer next year, following a peak in vacancy rates toward the end of this year, leading to a recovery in the overall property market,” Kawashima, 51, said. “Investor appetite is returning, so it’s time to aggressively enter the market early for arbitrage opportunities.”
Tokyo’s office vacancy rate rose to a record high in February, according to Miki Shoji Co., a privately held office brokerage company. Still, Tokyo replaced Hong Kong as the world’s most expensive office location after rents in the Japanese capital declined at a slower pace, according to broker Cushman & Wakefield Inc.
‘Risk Appetite’
Kenedix is also in talks with U.S. investors interested in starting a more aggressive fund targeting a 20 percent internal rate of return, double the industry target of commercial property funds, Kawashima said.
“We don’t want to miss the wave of investors with risk appetite for opportunity funds,” Kawashima said. “The key is to find good properties in Japan to lure overseas capital.”
Kenedix is not alone in hunting for opportunities to tap Japan’s property market. Earlier this week, Chuo Mitsui Trust & Banking Co., Japan’s third-largest trust bank by assets, said it started a real-estate investment business and plans to buy offices and housing in central Tokyo. It aims to accumulate 150 billion yen in assets under management within five years, Nikkei newspaper reported earlier this week.
Kenedix had total asset of about 940 billion yen under management as of Dec. 31, according to the company’s latest financial statement. Its group net loss widened to 18.4 billion yen in the year ended Dec. 31, from 10.9 billion a year earlier. The company forecasts profit of 400 million yen this fiscal year.
Shares of Kenedix fell 0.9 percent to 27,470 yen on the Tokyo Stock Exchange at the 11 a.m. trading break. The stock has declined 7.7 percent this year, compared with a 4.3 percent gain by the Topix index.
--Editors: James Gunsalus, Malcolm Scott.
To contact the reporters on this story: Tomoko Yamazaki in Tokyo at tyamazaki@bloomberg.net; Katsuyo Kuwako in Tokyo at kkuwako@bloomberg.net
To contact the editor responsible for this story: Malcolm Scott at Mscott23@bloomberg.net
