Sumitomo hauls half of JPY50bn fund target

The Japanese conglomerate has teamed up with Tokyo-based investment manager Kokyo Asset Management for its foray into logistics.

Japanese giant Sumitomo Corporation has broken into the logistics real estate sector with a JPY50 billion (€360 million; $490 million) private fund, raising just over half of that capital from domestic institutional investors in just four months, PERE can reveal.

In February, Sumitomo teamed up with Tokyo-based property investment manager Kokyo Asset Management to make logistics a “fourth pillar” in its property business. Sumitomo itself already has operations in office buildings, commercial facilities and housing, and Osaka is expected to be one of its logistics business’ primary markets.

To jumpstart Sumitomo’s logistics business, the conglomerate and Kokyo set up a yen-denominated investment fund to attract domestic institutional and private investors, with an initial target of JPY50 billion. Although Sumitomo and Kokyo have discretion as the fund managers, the capital is only being raised progressively as the partnership secures deals, a Sumitomo spokeswoman explained.

As of now, Sumitomo and Kokyo have raised more than JPY25 billion of equity for the fund. The exact timeline for raising the remaining equity has not been disclosed, but it is understood that a final close could be reached by the end of the year.

The firm is planning to seed the fund with Sumitomo’s Akanehama Logistics Center and Kokyo’s LogiSquare Soka and LogiSquare Yashio. Other large, already functioning logistics facilities are also expected to be added to the fund’s portfolio over time. The spokeswoman said that Sumitomo and Kokyo have an additional three projects in the pipeline already.

The sub-department of Sumitomo responsible for this logistics fund is Sumisho Realty Management, which is based in Tokyo. Sumisho now has a total of JPY167 billion of assets under management across residential, office, retail and logistics. In an announcement made earlier this year when the fund launched the firm said it considered domestic logistics properties in Japan to be reliable high-demand assets, with increasing demand expected to be driven by the modernization of antiquated logistics facilities and the expansion of e-commerce expands.

The new logistics business is also expected to both support and be supported by Sumitomo’s other business lines, which include supermarkets, drug stores and ecommerce that need distribution lines with logistics facilities. “[Sumitomo] will use the broad-ranging know-how it has cultivated in numerous fields and in the real estate business to develop and operate/manage high-performance logistics facilities that satisfy the need for greater logistics efficiency,” the firm said in the previous announcement.