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Ex-Colony Japan veteran plots fund, strikes first deal

After establishing Orange Grove Capital Management early last year, Toshio Masui has closed a $227 million deal and is already planning a fund launch by the end of the year.

Toshio Masui, a former senior executive in Japan of Colony Capital, has closed his first major deal since leaving the private equity firm to start his own business, and PERE has learned that he is also is set to launch his first fund.

His Singapore-based firm Orange Grove Capital Management, which he started last year, has bought 17 entertainment facilities from domestic entertainment company Round One for JPY23.27 billion (€165 million; $227 million), a firm spokesman confirmed.

For now, the firm is raising capital on a deal-by-deal basis, and the equity for this deal was understood to have been about $110 million, raised via a separate account with a Middle Eastern sovereign wealth fund.

“We think the time is right be aggressive now, and we’re looking at bigger deals in Japan,” he said.

At the same time, the firm, which will focus its energies on Masui's familiar Japanese market, is understood to be plotting the launch of its first blind-pool fund for this year. Orange Grove declined to comment on fundraising, but it is understood that the firm is currently waiting on regulatory clearances, and hopes to launch the fund after the summer.

While details are yet to be confirmed, the firm is expected to target between $500 million and $1 billion of equity for the maiden fund, but is also expecting to attract co-investment money as well. Its target IRR is understood to be more than 15 percent, but the fund may also include a long-term hold option for investors looking for core returns.

Orange Grove is expected to focus on a more value-added strategy overall for the fund, and is understood to already have a deal pipeline to seed the fund. While Orange Grove will not go into specialized sectors like logistics, the firm is looking at certain alternative real estate assets such as hotels and golf courses.

Many of the initial investors Orange Grove will target are expected to have worked with Masui before, and all will be institutional investors such as sovereign wealth funds, pension funds, and university endowments. It is understood that 50 percent of the capital for the Japan-focused fund is expected to come from Asia, while the remainder should be split between Middle East, Europe and US investors.

With 28 years of experience in the Japan real estate market, Masui joined Colony Capital in 1998 to help set up its Japan business. As Colony shifted its investment focus to more Europe and US-centric after the crisis, however, it is understood that Masui chose to set up his own Asia-focused firm. While Orange Grove is hoping to grow into a pan-Asia firm eventually, for now it will focus strictly on Japan, the firm spokesman explained.