Redwood Group to Raise Up to $600 Million for Tokyo Warehouse Investments
Redwood Group, the manager of about $1 billion of real-estate assets, plans to raise as much as $600 million for a fund that will invest in warehouses in greater Tokyo as it bets on rising trade between Japan and China.
The company aims to raise $400 million to $600 million by June 2011 from investors including pension funds and endowments globally, said Chief Executive Officer Stuart Gibson. The loan- to-value ratio of the fund, slated to start in October, will be about 55 percent to 60 percent, enabling Singapore-based Redwood to buy as much as $1.3 billion of properties, he said.
Redwood will compete against rivals including GIC Real Estate, the property investment company of the Government of Singapore Investment Corp., and AMB Property Corp., the world’s second-largest warehouse owner, which are investing in Japanese storage facilities as trade between China and Japan surged 35 percent to a record high.
“There is a dearth of new product coming to the market in the next two quarters,” Gibson said in an interview in Tokyo on Sept. 1. “We will be targeting assets and locations in the Tokyo Bay and its surrounding port area.”
Gibson, a former president of ProLogis Japan, founded Redwood in 2006 with Charles de Portes. Gibson and de Portes also were joint-venture partners in Tokyo for San Francisco- based AMB in 2002 to 2006. Denver-based ProLogis is the world’s biggest warehouse owner.
China-Japan Trade
Total trade value between China and Japan surged 35 percent to $138.3 billion in the six months ended June 30 from a year earlier, according to the Japan External Trade Organization. It was a record for the semiannual period and is expected to reach a record high this year, it said.
A surge in demand for investment-grade warehouses at a time when no new supply of space for such facilities is available makes it an attractive investment, Gibson said. The firm plans to allocate about 75 percent to 80 percent to greater Tokyo while the rest it plans to invest in major cities west of Tokyo including Osaka, Kobe and Nagoya, he said.
About 40 percent of the fund’s capital will go toward building warehouses and the rest will be used to buy existing facilities that are in operation, Gibson said. The fund will have a target annual return of 15 percent, he said.
Redwood identifies investment-grade warehouses as facilities with ramps that allow trucks to be driven to each floor, have high ceilings, and floors that can withstand at least 1.5 tons per square meters, he said.
Demand for distribution centers in greater Tokyo tripled to 192,000 square meters (2 million square feet) in the three months ended July 31 from a year ago, according to a report by Tokyo-based Ichigo Real Estate Service Co. There were no new supplies of warehouses in the quarter, pushing the vacancy rate to 9.9 percent in July from 13 percent in April, the report said.
“We think the occupancy is moving to the right direction and justifies the timing of re-entry into the logistics real estate business,” Gibson said.
To contact the reporters on this story: Kathleen Chu in Tokyo at Kchu2@bloomberg.net; Katsuyo Kuwako in Tokyo at kkuwako@bloomberg.net
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