Japan's Daiwa to buy Davinci REIT manager-sources

TOKYO, June 16 (Reuters) - Daiwa Securities Group Inc (8601.T), Japan's second-largest broker, will buy a real estate management unit of KK DaVinci Holdings 4314.OJ to expand its property business, three sources familiar with the matter said.

Daiwa plans to buy all shares of KK DaVinci Select, which manages the assets of real estate investment trust (REIT) DA Office Investment Corp (8976.T), the sources said, speaking on condition of anonymity as the deal has not been made public.

Daiwa will also invest some money into DA Office Investment, the sources said. The REIT has a market value of about $700 million and a portfolio of some 30 office buildings, mainly in central Tokyo.

The deal could be announced as early as Wednesday, the sources said.

A Daiwa spokesman declined to comment. No one at KK DaVinci Holdings or KK DaVinci Select could be reached for comment.

Japan's property market has been hit hard as the country's worst recession since World War Two saps demand for houses and office space. In 2008 alone, nearly 600 real estate firms collapsed, including several listed firms.

Daiwa Securities, which has designated the property business as one of its growth areas, hopes the acquisition of a REIT manager will allow it to generate steady commission income while also gaining market know-how, the sources said.

For DA Office Investment, the deal is aimed at bolstering its creditworthiness, allowing it to smoothly refinance debt, the sources said. (Reporting by Emi Emoto; Editing by Jon Loades-Carter)