M&G deploys $200m in Japan, Australia

The London-based property investment firm has acquired three properties for its open-ended Asia core fund, bringing the firm’s regional portfolio to $1.6 billion.

M&G Real Estate, the private real estate investment arm of UK insurer Prudential, has added three properties in Japan and Australia to its portfolio for a total value of $200 million, according to a firm statement.

The three properties include a residential building in Fukuoka, Japan, an office structure in Osaka, and another office building in Melbourne. The assets were acquired to “complement” M&G’s existing exposure in those respective markets.

“Whilst we usually hold assets based on the long term fundamentals, we have the flexibility to take a tactical view where we see an opportunity to take advantage of shorter term market trends,” M&G fund manager Erle Spratt said. “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 from our Japanese portfolio.”

The asset in Melbourne was bought at a price reflecting a 1 percent yield premium to prime office assets in the same precinct of the city’s central business district. The building’s large floor plate catering to large occupiers is difficult to find in Melbourne, according to the statement, and is expected help maintain high occupancy over time.

The capital for these acquisitions came from the firm’s open-ended Asia Property Fund, which was launched in 2007 as the region’s first core real estate fund. PERE revealed in March that M&G was planning to bring that fund’s total assets under management to $3 billion before the end of next year and that the firm would raise at least an additional $900 million of equity for the fund.

M&G declined to comment on its growth plans when approached, but it is understood that M&G raised another $100 million of capital for these deals. The firm has now brought the core fund’s total assets under management to $1.6 billion in value, and has committed all of its equity raised so far.

M&G is targeting for the fund returns of approximately 8 percent post-fees, however, at this point, its portfolio is understood to be generating returns of approximately 9 percent overall, with about 50 percent of that coming from distributions. The target leverage for the fund is approximately 30 percent.