KBC eyes $1 bln Japan property fund

LONDON, Aug 12 (Reuters) - KBC Asset Management UK said on Tuesday that it was looking to raise $300-400 million in equity for a Japanese property fund ahead of an anticipated boom in the world’s second largest real estate market.

With additional debt funding, the fund would have up to $1 billion of spending power, said a spokeswoman for KBC Asset Management UK, part of Belgian financial group KBC KBC.BR.

In a note, KBC said it has teamed up with Japanese asset management specialist MAC Investment Management to set up the seven-year closed-ended fund, which will invest in office, retail and industrial property in Tokyo, Fukuoka, Osaka and other major Japanese cities.

The note said KBC had identified a seed portfolio of up to 25 property assets which they hoped to buy during the first three years of the fund’s life.

“This fund offers a gateway to investing in the Asian property market,” said Simon Radford, chief executive of KBC Asset Management UK.

“The fundamentals are strong and there is upside potential for commercial land prices and rental increases,” he said, citing a shortage of high-quality office space across Japan and government reforms aimed at encouraging inward investment. The fund is targeting a 15 percent internal rate of return.

Radford added that real estate investments in Japan had a historically low correlation with European and North American markets, making it a good diversifier for global property investors.

KBC’s fund launch coincides with a grim period for western European property markets including Britain, where commercial real estate values have tumbled about 20 percent since June 2007 and show few signs of bottoming out.

Japanese commercial property values have held up relatively better in that period and Tokyo overtook London and New York in commercial property sales in the first half of 2008, according to Real Capital Analytics Inc.

But Japan also faces growing headwinds in the wake of a global credit crunch, with the economy slowing and the risk of recession rising.

(Reporting by Sinead Cruise and William Kemble-Diaz; Editing by David Cowell)

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