Japanese real estate investment firm likely to buy an asset management company or financial services company

Japanese real estate investment firm Risa Partners Inc said yesterday that it is likely to buy an asset management company or financial services company to expand its business in the next three years.

Risa - which also offers corporate turnaround consultancy and buys real estate-backed loans and non-performing loans - has benefited from a buoyant property market in Japan, where land prices have risen for the first time in 16 years and the economy is steadily recovering.

‘It is getting difficult to get your hands on properties. Now the way to go is you offer advice and solutions to corporations that hold real estate and then these assets become available,’ Risa president Atsushi Imuta told Reuters in an interview. ‘A firm which does only property business will face a tough time from now on.’

Mr Imuta also said the company is interested in acquiring a firm that offers special financing services.

‘We would like to have special services such as real estate collateral financing and mezzanine loans,’ he said, referring to a type of loan that is a hybrid of debt and equity financing.

‘I would think that something could happen in the next three years,’ Mr Imuta said, adding that his firm is already looking for potential partners.

The company’s net profit more than doubled to 3.03 billion yen (S$38.2 million) in the year ended in December 2006, thanks partly to proceeds in sales of large-scale property in real estate. Recurring profit also more than doubled to 5.2 billion yen.

Risa unveiled an ambitious three-year business plan in February, aiming for a net profit of 8.2 billion yen and tripling recurring profit to 15 billion yen by December 2009.

Risa, which jointly invested in properties with fund management company Grove International Partners, has a total of about 160 billion yen worth of real estate under management and plans to add a net 60 billion yen every year.

Any acquisitions of an asset management company would boost the assets under management and generate more fee revenues, but Mr Imuta said volume is not a priority. ‘Asset size would increase . . . but the asset purchasing power and asset management skills are key.‘

In its investment banking business, Risa set up Frontier Management Inc in January by recruiting some of the officials from the Industrial Revitalization Corporation Japan (IRCJ), a government-backed body which helped Daiei Inc and other major companies to restructure.

Mr Imuta said Frontier Management, which offers M&A advisory and other management consultant services, has been actively seeking deals and may start generating a profit from this year.

The company is also taking on new businesses such as setting up the RISA Corporate Solutions Fund worth about 20 billion yen to invest in equities or debt to help companies boost their profit. Mr Imuta said there are already several deals in the pipeline for the funds to be allocated.

Source: The Business Times, 31 May 2007