Tokyo: Sparx Group Co., a Japanese asset management company, will start a fund that will invest in the nation’s residential properties after receiving money from a sovereign wealth fund in the Middle East.
Sparx will start the fund with AD Investment Management Co., which manages a real estate investment trust, with initial capital of about 9 billion yen (Dh425 million, $116 million), said Sparx CEO Shuhei Abe. The fund, which will last for five years, has a maximum capacity of 40 billion yen and will invest in six apartment developments in Tokyo and Nagoya.
The company, whose assets have dropped more than 77 per cent since a peak in 2006, is widening offerings beyond equity-related products as Abe tries to bring his firm back to profitability and capitalise on what it expects will be a recovery in Japan’s property market. Land prices dropped at a slower pace for a third year as low interest rates and tax incentives supported housing demand, a government report earlier this month showed.
“Japan’s property market is starting to show signs of a turnaround, yet only a limited number of investors are actually starting to invest in the market,” Abe said. “That means, we can offer decent returns based on high-quality assets by entering the market now.”
Of the initial capital, 2.6 billion yen will come from a sovereign wealth fund and AD Investment. The rest will be debt, he said. Management fees on the fund are higher than the average earned for other products.
Sparx last year tied up with Kachikaihatsu Co., a Tokyo based property company, which operates the Best Western hotel brand in Japan, for its first hotel fund that was aimed at providing lodging for relief workers and volunteers following the March 2011 earthquake and tsunami.