Pacific Century Group Holdings has completed the financing arrangements for its flagship Pacific Century Place development in central Tokyo. The company last week gave a mandate to the Industrial Bank of Japan and Hongkong and Shanghai Bank to co-lead a 16.5 billion yen (about HK$883.34 million) five-year syndicated loan. Deputy chairman Francis Yuen Tin-fan said the loan was in line with the prevailing rates in Japan, between 3 per cent and 4 per cent inclusive of fees, 'on the basis that we swap into fixed rates for the next five years'. The loan was being under-written by the two banks which guaranteed Pacific Century the cash, he said. About 40 per cent of the project's cost - estimated at 130 billion yen - is covered by a 25-year, 48-billion yen limited-recourse loan arranged with the Japan Development Bank and fixed at 2.5 per cent interest for the full term. On Thursday, Pacific Century also increased its paid-up capital in the project to 50 billion yen from 45 billion yen, which the banks wanted in place before the loan syndication went through, Mr Yuen said. 'That was to satisfy the debt-to-equity ratios and some other considerations,' he said. Pacific Century has a 55 per cent stake in the development, held under Pacific Century Japan. Hutchison Whampoa has a 45 per cent stake, which it acquired last August at the original cost. About 17.5 billion yen of the estimated 31.2 billion yen construction costs would be deferred by the contractors until completion, Mr Yuen said. Mr Yuen said the attractiveness of the Tokyo project was underlined by the low cost of capital and the positive cash flows available even after financing costs were paid. Mr Yuen said: 'The project is very attractive. We have a positive yield situation - in a prime location, in a prime city - with all the probability of a huge capital gain.' However, Mr Yuen could not predict when these gains might come about. 'I don't think anybody could tell you, but I would be sitting very comfortably when the rentals are higher than the interest costs.' Pacific Century chief executive Peter To said vacancy rates in the core central Tokyo area were extremely low, despite the ongoing recession. 'The vacancy rates for large floor-plate units in that downtown area are only about 2 per cent,' he said. Mr To said the company had been talking to potential tenants and, 'in terms of the projected demands, their requirements are all in excess of 50 per cent of the total space in the project'. 'In this district, only one other major building is owned by foreigners,' he said. Because of Japan's financial Big Bang - the opening up of its financial markets to outside competition - Pacific Century is expecting increasing demand for space from international financial institutions. Mr Yuen said: 'You can probably draw the conclusion from us that we feel that Japan is relatively attractive, so we are putting more of our resources into [Japan], rather than reducing our exposure . . . 'Apart from this [Pacific Century Place], we are buying more completed rental units and we are going to keep on buying. Last year, we had zero, and now we have seven or eight,' he said.