2011-01-21 14:35

TOKYO - Grosvenor Group Ltd, the real estate company owned by the family trust of the UK's Duke of Westminster, aims to raise at least $270 million for a fund that will invest in properties in China as part of its expansion in Asia.

Grosvenor, with about $16 billion in assets, plans to start the fund by the end of the year after completing investments for the current China-focused fund by August, said Morgan Laughlin, a managing director at Grosvenor Fund Management Japan Ltd. The new fund will have an investment period of three years and will probably be bigger than the current $270 million fund, he said, declining to elaborate before the fund-raising period.

Grosvenor is banking on a recovery in investor appetite for real estate investments in Asia, home to the world's fastest-growing economies, amid signs rents are bottoming out and economic growth is boosting demand for properties. The firm also is aiming to raise $500 million for a fund that will invest in office buildings and apartments, mainly in Tokyo.

"Investors are now more proactively asking about opportunities in Asia," said Laughlin. "We think it's an appropriate time to be coming back into the market."

London-based Grosvenor wants investments in Asia to account for 20 percent of its portfolio, almost triple the current allocation, said Nicholas Loup, who runs Grosvenor's principal investment and development business in the region. The process may take at least five years, he said.

The firm opened its first Asian office in Hong Kong in 1994, followed by its Tokyo office in 2001. Grosvenor manages a total of 14 funds globally, according to the company's website. In Asia, it runs three property funds in Japan and one in China.

The Asia-Pacific region will lead the recovery in the office-leasing markets ahead of Europe and North America, according to a forecast by Chicago-based industry researcher Jones Lang LaSalle Inc in December.

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For the new funds, Grosvenor is targeting investors in China and Japan in addition to global institutional investors, Laughlin said. The China fund may invest in commercial properties such as shopping malls, he said.

Retail sales in China advanced almost 19 percent in November from a year earlier. Economic growth in the world's most populous nation has averaged 10.3 percent a year over the past decade, nearly six times faster than the US.

Chinese developers shifted more investments to commercial properties last year as the government imposed curbs on homes, marking the start of an "era" for malls and office and industrial buildings, Cushman & Wakefield Inc said on Jan 13. Commercial real estate investment jumped 42 percent last year from 2009, while transaction volume rose 20 percent, it said.

"The business and economic connection is growing very rapidly and becoming very significant" between China and Japan, Loup said. "If you take that back to the property sector, we would expect to see an increase in activity in both directions."

China's economic growth has prompted Daiwa House Industry Co, Japan's largest home builder, and Mitsui Fudosan Co, the country's biggest developer by sales, to start businesses in the nation during the past five years.

Grosvenor plans to start buying properties for the Japan-focused fund as early as September, amid signs that office rents in Tokyo are bottoming out, said Laughlin. The fund will have an investment period of eight years.

Bloomberg News