Daishin Asset Management Co. Ltd. has launched a public fund to raise up to 80 billion won ($68 million) to fund its $180 million purchase of a Tokyo office building, targeting individual investors shifting away from lackluster domestic stock markets.
The South Korean asset manager signed an agreement to buy Canal Side Building in the southern Tokyo suburb of Shinagawa from Godo Kaisha Orange in March, the company said in a regulatory filing earlier this week.
It will close the acquisition on May 17, after raising the planned capital in a three-year fund until May 13. For the remainder of the price, it will borrow a senior loan.
The closed-end fund is expected to deliver annual returns of 5%, more than double the deposit rates on savings accounts of around 2% per year on average.
Panasonic Consumer Marketing Co. Ltd. uses almost all the 44,350-square-meter building under a five-year lease until the end of 2023. It will pay 1.1 billion yen ($9.9 million) in rents per year.
Public funds for overseas real estate investment in South Korea returned an average 8.59% in the past three years, compared with the 5.65% for active equity funds during the same period, according to FnGuide, a data provider.
To hedge against currency risk, Daishin will enter into three-year cross-currency interest rate swaps for 80% of the investment principal and 50% of dividend incomes from the Tokyo office building.
Earlier this year, two public funds launched by Hyundai Asset Management Co. Ltd. and Korea Investment & Securities Co. Ltd. had raised a combined 95 billion won as planned to fund their property acquisition in Scotland and Milan, respectively.
In total, the outstanding value of overseas real estate investment funds in the country came to 42 trillion won at the end of March, up from 39.5 trillion won at the end of January, according to the Korea Financial Investment Association.
By Byeonghun Yang
<Edited by Yeonhee Kim>