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July 29 (Bloomberg) -- Mitsubishi Estate Co., Japan’s largest developer by market value, plans to expand a property fund that targets pension investors to help boost its asset- management business.
The company aims to increase the size of an open-ended fund, or private real estate investment trust, to as much as 500 billion yen ($6.4 billion) from about 30 billion yen within the next 10 years, said Tetsuji Arimori, president of Mitsubishi Jisho Investment Advisors Inc., the Tokyo-based asset management unit of Mitsubishi Estate. The asset manager will buy properties from its parent and other real estate owners, he said.
“Our main business strategy is to concentrate on growth of our open-ended fund,” Arimori in an interview in Tokyo. “The size of such kind of growth is very much possible.”
The fund was set up in March as part of the company’s long- term goal to more than double the total assets under management to 5 trillion yen by 2020. Mitsubishi Estate is betting on the need for Japanese pensions to lift their property holdings, which now make up only 1 percent of their $2.46 trillion investments. That compares with 12 percent in Australia and 6 percent in the U.K, according to a report by UBS Global Asset Management.
Mitsubishi Estate shares fell 0.4 percent to 1,384 yen at the 3 p.m. close of trading on the Tokyo Stock Exchange.
Japanese pension funds plan to invest in a greater variety of assets after two decades of slumping returns at home and as the nation’s population ages. Thirty-one percent of 135 retirement funds plan to increase alternative investments such as real estate from this fiscal year starting April 1, according to a JPMorgan Asset Management (Japan) Ltd. survey in May.
Mitsubishi Estate was the second firm in Japan to create an open-ended property fund. Nomura Real Estate Holding Inc. set up a 20 billion yen fund in November and plans to double its assets to 40 billion yen by the end of March 2012, according to the company.
Mitsubishi Estate’s fund, which has a debt-to-equity ratio of 35 percent to 45 percent, aims for an annual target return of as high as 7 percent, Arimori said.
Mitsubishi Jisho, which was established in 2001, has 900 billion yen of assets under management. Apart from the open- ended fund, the asset manager will continue to set up private real-estate funds, Arimori said.
Mitsubishi Estate’s profit dropped 34 percent to 4.5 billion yen in the three months ended June 30 as it sold fewer apartments following the March disaster, the company said today in a statement.
--Editors: Linus Chua, Tomoko Yamazaki
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