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Mitsubishi Estate eyes 100bn-yen overseas real estate fund

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The East Side of Manhattan is seen at sunrise in New York City.   © Reuters

TOKYO -- Mitsubishi Estate is to create a fund of about 100 billion yen ($880 million) to invest in overseas properties, sources told The Nikkei. The idea is to attract surplus domestic capital investors find themselves with now that the Bank of Japan has introduced a negative interest rate.

     Mitsubishi Estate plans to collect capital from domestic institutional investors such as pension funds and life insurers and to invest it in prime office buildings and commercial facilities in major U.S. and European cities, according to the sources.

     The company intends to pay dividends to investors based on rental revenue, aiming to achieve an annual investment return of around 5%, the sources said.

     Over the next three years, the company plans to invest in four or so overseas properties that it believes will likely generate a steady source of rental revenue. It will search for these properties mainly in New York and other big cities in advanced countries.

     Initially, the company aims to collect as much as 100 billion yen but is willing to accept an additional dose of capital if enough investor demand remains.

     This will likely become one of the largest overseas real estate funds aimed at domestic investors.

     Until now, the company has managed overseas real estate funds targeting only certain investors; this will be the first time for the company to collect capital from a wide range of institutional investors.

     Domestic rivals Mitsui Fudosan and Nomura Real Estate Holdings are also considering similar real estate funds.

     In January, the BOJ adopted a negative interest rate policy that has pushed the yield on 10-year government bonds down to near zero. As a result, there are fewer investment options in Japan that can offer stable returns.

     As a large amount of investment money has already found its way into various properties at home, Mitsubishi Estate is looking to expand the scope of its investments to include overseas properties.

(Nikkei)

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