Tokio Marine Property Plans to Raise $588 Million to Buy Tokyo Apartments

Tokio Marine Property Investment Management Inc., a unit of Japan’s biggest casualty insurer, plans to raise 50 billion yen ($588 million) to invest in apartments in Tokyo as it bets that land prices are bottoming.

Tokio Marine Property, with 209 billion yen in assets, plans to start a fund and begin buying properties as early as the end of the year, said Takashi Uematsu, president of the Tokyo-based company. Tokio Marine Property’s first fund in two years will have a target return of about 10 percent, he said.

Residential land prices in greater Tokyo fell for the first time in three years in 2009 after the global credit crisis deepened with the collapse of Lehman Brothers Holdings Inc., a former lender and buyer of real estate in Japan.

“Land prices in greater Tokyo probably won’t decline further,” Uematsu said in an interview yesterday. “While the population in Japan is declining, the population in Tokyo is growing.”

Investors in the fund may include Japanese institutions and pension funds, Uematsu said. The asset manager may also approach foreign investors, he said.

The company is a unit of Tokio Marine Holdings Inc.

Housing rents in Tokyo’s 23 wards rose or fell as much as five percentage points in the past decade, less than the 10 percentage points fluctuation of office rent in Tokyo’s five central wards in the period, according to data compiled by Tokio Marine.

“Residential is one of the most stable and easy to make investments in as long as you choose the right locations,” Uematsu said.

Maturing Loans

A rising number of property loans that are coming due as prices decline also may create opportunities to buy real estate, Uematsu said.

“Property loans that were taken out to fund acquisitions in 2007, 2008 will reach maturity soon,” said Uematsu. “Some properties may be put up for sale as some loans are being disposed.”

The number of commercial mortgage-backed securities that are due will peak this year at 1.23 trillion yen, according to an estimate by Credit Suisse Securities (Japan) Ltd. in Tokyo.

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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