sumitomo trust, axa plan jap property fund

Oct. 19 (Bloomberg) -- Sumitomo Trust & Banking Co., Japan’s fifth-largest bank, said it plans to raise 100 billion yen ($1.1 billion) with French insurer Axa SA to start a Japanese real estate fund.

The two companies plan to set up the fund in the first half of next year to invest in office property in “prime areas” of Tokyo, Osaka-based Sumitomo Trust said in a statement on its web site today. They plan to raise 50 billion yen in equity and the remaining 50 billion yen in debt, Sumitomo Trust spokesman Takuya Sakamoto said.

Japan’s real estate market is showing signs of recovering from a slump that saw land prices drop the most in five years as the recession discouraged buyers and tighter credit markets choked off funding. Confidence at large real estate firms improved the most in almost six years, the Bank of Japan’s Tankan survey said this month, as office vacancy rates in Tokyo show signs of improvement.

“Land prices in central Tokyo are starting to bottom out,” said Takashi Ishizawa, a Tokyo-based real estate analyst at Mizuho Financial Group Inc. “Investors looking to buy Japanese property will probably focus on central Tokyo for the time being.”

The Tankan index of business sentiment among large real estate firms improved to -11 in September from -24 three months earlier, the Bank of Japan said on Oct. 1. It was the first improvement in sentiment since June last year.

Tokyo’s office vacancy rate for August was 7.57 percent, unchanged from July, ending 18 months of gains, according to a report in September by Miki Shoji Co., a privately held office brokerage company. The rate was 7.62 percent in September.

Average land prices declined 4.4 percent in the 12 months ended June, the Ministry of Land, Infrastructure, Transport and Tourism said in a report last month.