Sparx Raises $45 Million for 2nd Quake Reconstruction Fund

Sparx Group Co. (8739), a Japanese asset manager, raised 3.6 billion yen ($45 million) for its second fund that will invest in building hotels areas devastated by last year’s Japan earthquake.

Banks including Shinsei Bank Ltd. (8303) and Bank of Yokohama Ltd. (8332) provided non-recourse loans for the fund, while companies including Daiwa House Industry Co. (1925), Japan’s biggest homebuilder, and Denso Corp. (6902), an auto parts maker partially owned by Toyota Motor Corp., provided mezzanine debt, said Chief Executive Officer Shuhei Abe. Mezzanine debt is a type of leveraged loan repaid after senior loans in a default.

Sparx’s Reconstruction Fund is part of the company’s efforts to widen offerings from stock-related funds to become profitable as assets dropped more than 70 percent since their peak in 2006. The company in September said it will start a fund that will invest in the nation’s residential properties after receiving money from a sovereign wealth fund in the Middle East.

“The fact that banks are supporting this project is actually a progress for us,” Abe said in a telephone interview. “There are still not enough places to stay in the quake-hit areas and demand is expected to increase.”

Rebuilding Effort

A 314-room hotel Sparx’s first 1.1 billion yen fund built in Natori city in Miyagi prefecture, northeast of Tokyo, to provide lodging for relief workers and volunteers following the disaster opened on Oct. 1, Abe said. The second fund will be dedicated to two hotel projects with a total of 1,000 rooms in the same prefecture, he said. The hotels are expected to open in April, he said.

Japan plans total spending of 19 trillion yen over five years for reconstruction after the March 2011 magnitude-9 temblor and tsunami that devastated the northeast coast, leading to a nuclear crisis and leaving almost 20,000 people dead or missing.

The Tokyo-based asset manager widened its loss to 1.59 billion yen for the six months ended Sept. 30, compared with 820 million yen a year ago, as asset management and performance fees declined.

Separately, Sparx won a bid to build a mega-solar power plant in Toyama prefecture on the Japan Sea coast, said Yoshiko Mitsui, a vice president at unit Sparx Green Energy & Technology, which manages the project.

The plant, on about 15.8 hectares and generating 7,686 kilowatts, is scheduled to start operation in February 2014, Mitsui said.

In September, Sparx entered the renewable business, revealing plans to build a mega-solar power plant in Kumamoto prefecture in southern Japan.

Sparx’s shares fell 1 percent 5,100 yen at the close of trading on the Jasdaq exchange, bringing its year-to-date drop to 4.9 percent. That compares with the 8.4 percent gain by the Jasdaq Stock Index.

To contact the reporters on this story: Tomoko Yamazaki in Singapore at tyamazaki@bloomberg.net; Komaki Ito in Tokyo at kito@bloomberg.net

To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net

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