Mitsubishi Corp, Japan’s largest trading house, has launched an investment fund focusing on London commercial property that has the potential to raise up to £500m from institutions in its home country, as well as other nations.
The company has said that it has been under pressure from pension funds and domestic insurers to provide access to funds that could provide a higher yield than government bonds.
This venture could potentially yield net returns to investors of between 8-10 per cent per year.
This represents a yield that is 13 times higher than a 10-year JGB.
Mitsubishi has partnered with Swiss Investment Bank UBS on the deal.
The Bank will set up the fund and provide £50m in seed capital.
Initially, the fund will focus its attention on refinancing developments of malls and apartment complexes in London.
There is a void in the market created by the withdrawal of a number of European and UK lenders that were active before the financial crisis, and this is the niche the company has decided to focus on.
The fund will have a cap of £500m. Some analysts suggest that flows from Japan into these types of funds will only increase if the central bank’s aggressive bond purchases keep domestic interest rates down while inflation continues to increase.
This deal is the first one for the company outside of Japan.
It has partnered with UBS since 2000 in managing two of the country’s biggest real estate investment trusts.
Property assets owned by the Japanese REITS include the Japan Airlines hangar at Haneda airport and the Gyre shopping complex in Omotesando.
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