Tokyo: Aviva Plc’s Morley Fund Management Ltd. will invest $10 billion in property in Asia over the next four years, and will put half of that into Japan, where prices are increasing for the first time since 1991.
Morley, which had about $60 billion of real estate assets worldwide at the end of 2006, formed a $500 million joint venture with Mitsubishi UFJ Trust and Banking Corp. to invest in Japanese property, said Ian Womack, head of property at Morley. Mitsubishi UFJ, a unit of Japan’s largest bank, will advise Morley on the purchase, sale and management of properties.
“We have a gap in Asia which we are now filling,” Womack said today at a news conference in Tokyo. “It is the right time to be investing in Japanese property for our clients and we are looking for compelling investment opportunities across Japan.”
Japan’s first increase in land price in 16 years is attracting companies like Aviva, the UK’s biggest insurer, to invest in the country. Today’s announcement came after Morgan Stanley agreed on April 13 to buy All Nippon Airways Co.’s 13 Japanese hotels for $2.4 billion in Japan’s largest real estate acquisition.
Morley, which will mostly focus on office buildings, forecasts total returns of as much as 8% for Asian investment, with yields of 4% and rental growth of 3 to 4 % said Andrew Peacock, a Morley fund manager.
“The market is supported by good tenant demand,” Peacock said at today’s press conference. “There is still a very positive yield gap between the costs of borrowing and property yield which is uncommon in the UK and many of the European markets,” said Peacock.
Morley has $2 billion of equity to invest initially, and has allocated half of that to Japan. The company said it is looking to set up partnerships in China, South Korea and India and has already invested $430 million in the region.