Fund manager spends US$200m on properties in Japan, Australia

M&G Real Estate, one of the world's top 25 real estate fund managers by assets under management, has acquired two properties in Japan and one in Australia with a combined market value of more than US$200 million.

The move comes as an increasing number of Western funds become more active in Asia-Pacific.

The company said it made the purchases with a view to building long-term sustainable income and diversifying its core Asia real estate portfolio.

Fund manager Erle Spratt said the acquisitions added distinct value to the firm's Asia-Pacific property portfolio as it continued to diversify risk and build on the attractive investment performance this strategy had achieved on a one- and three-year basis.

M&G Real Estate is the real estate fund management arm of M&G, the investment unit of Britain-based Prudential.

"We are constructing a portfolio in Japan comprising two-thirds income-oriented assets and one-third growth investments to deliver attractive income and capital growth," Spratt said. "We see a healthy pipeline of opportunities to invest in Japan that fit this strategy."

Peter MacColl, global head of capital markets at international property consultancy Knight Frank, said: "We are seeing groups in Europe and the United States becoming more active in the region, although this is not necessarily being translated into deals and volumes at this point. Purchasing property in Asia-Pacific is buying into the continued growth story and maybe a diversification strategy."

Japan was becoming increasingly attractive, although it was not easy to execute deals at the moment, MacColl said.

He said China would undoubtedly become an important investment destination as the market continued to open up.

When asked whether investors would prefer Japan to China, MacColl said the occupier markets (in which property is held for leasing) in Japan were improving, and the low cost of debt and a weakened yen made the country relatively attractive, although there was a lot of competition from local investors.

"In China, there is not a huge amount of liquidity, given the size of the market, and the occupier markets have weakened slightly," he said.