Japan property billionaire bets $202 million on China

Billionaire Akira Mori, the owner of Japan’s most profitable closely held developer, said he has formed a company to invest in China and advise Japanese companies on expanding there.

“Japan’s environment is getting difficult; I want to build a company that is willing to take risks,” said Mori, 76, in an interview in Tokyo. Mori said he plans to expand the assets of MA Platform Group, set up with 16 billion yen ($202 million) of capital, to 50 billion yen in five years. MA Platform has invested 18 billion yen including financing so far.

Mori seeks to invest in educational services and mass media in China, he said. The company became the second-largest shareholder in closely held Beijing-based Tsingda eEdu Corp., which offers classes over the Internet.

Japan’s more than a decade of deflation and sluggish economic growth has forced the Bank of Japan to keep interest rates near zero. In contrast, China surpassed Japan as the world’s second-largest economy in 2010 and has introduced a series of tightening measures to keep its economy from expanding too rapidly. Mori plans to take advantage of the near-zero interest rates in Japan to invest in one of the world’s fastest- growing economies.

Mori’s company can borrow at 1 percent whereas corporations in China will need to pay at least 6.5 percent for debt, he said.

“It’s easy to invest in China and other places because the financing is cheap and the yen is strong,” said Mori.

Yen advantage

The Japanese yen has strengthened 35 percent against the dollar in the past five years, from 122.96 on July 18, 2007. The yen rose 0.2 percent to 78.61 per dollar today in Tokyo.

Tokyo-based MA Platform, or MAP, will generate about 1 billion yen of profit this business year, he said. MK Trust, a Tokyo-based consulting firm, will work with MAP to provide advice on potential mergers and acquisitions for Japanese and Chinese companies.

MAP also has placed capital in CICC Growth Capital Fund I, which invests in companies in Greater China, an area that includes Hong Kong, Taiwan and Macau. China International Capital Corp., the fund manager, is 43.4 percent owned by Central Huijin Investment Ltd., the investment arm of China Investment Corp.

Mori said he set up the company to follow investment opportunities amid growing difficulties in the domestic market. Japan’s current-account surplus was the smallest for the month of May since at least 1985 and machinery orders fell the most in more than a decade.

Office vacancies

Tokyo’s office vacancy rate has been rising due to an increase of new supply. The vacancy rate in June rose for a third straight month, to 9.43 percent, a record high, according to Miki Shoji Co., a closely held office brokerage company.

“Japan’s real estate market is getting difficult,” said Mori. “We can continue as it is, but it’s better to invest in China and in other sectors.”

The Topix Real Estate Index was the second-worst performer among the Topix index’s 33 industry groups today, declining 0.3 percent. The Nikkei 225 Stock Average rose 0.8 percent in Tokyo.

Mori Trust, of which Mori is chief executive officer, made 16 billion yen of profit for the year ended March 31. That is almost double the profit generated by Mori Building Co., which was run by his older brother, Minoru Mori, who died on March 8, even though the Mori Trust revenue was half of Mori Building’s for the same period.

Mori Trust manages 68 buildings in Japan, including the Tokyo Shiodome Building in a commercial district near Tokyo Bay, and operates about 30 hotels, the company said on its website. Mori has no plan to combine the two companies in the near term, he said.

Quicker decisions

“The concept of an investment company and a developer are completely the opposite, so it’s better to separate the two entities,” said Mori. “If the plan with MAP goes well, then that will help support the future of Mori Trust.”

Another reason that prompted Mori to form a new company is that he wants to be able to make decisions quickly, he said.

“Japanese companies tend to need a lot of time to come to a decision; all they do is have meetings and are reluctant to take on risks,” said Mori. “China’s environment changes so rapidly. The chance passed you by just as you were considering it.”

Competing globally

In terms of global competitiveness, Japan fell three places to rank ninth this year, according to the World Economic Forum. China advanced one place to rank 26th, the report showed.

Mori said he wants to use his experience in real estate and hotels in Japan to expand in China, where entrepreneurship flourished in the 1990s, he said. Many business owners are now faced with companies that are getting too big to manage or have difficulty with financing, he said.

“Many Chinese business owners have reached a plateau,” said Mori. “People want to know what to do next. I will be able to provide my 40 years of experience in running a business and provide advice through different business cycle.”

Mori may also work with companies in China that are interested in investing in Japan by providing consulting on a fee basis, he said.

“I want to create something that adds value to our society,” said Mori. “The existence of a company is to design something that our society needs, then one can expect profit that way.”