MGPA has got cash to spend on Japanese property acquisitions. It comes from MGPA’s third Asian fund and its Tokyo-based fund management team envisages that they will be allocated about $250 million.

Tom Mills is the CEO of Japan for MGPA. He was formerly with LendLease in San Francisco, and during 2001 and 2002 worked with LendLease Global Properties Fund team (now MGPA) on acquisitions in Tokyo. He moved to Tokyo in 2007, and joined MGPA earlier this year. Last week he raced in the Tokyo Marathon, finishing outside the medals in 4 hours and 36 minutes.

MGPA plans to invest the new money in a tricky asset class. The IPD monthly index, based on publicly available J-Reit appraisal data, states that capital value returns (not including rental income) in Japan for 2008 were -5.1% and in 2009 -11.1%.

That presents, it believes, the chance to make some cheaply priced acquisitions. Its main target is Tokyo office space, where it takes an opportunistic approach, which means trying to improve the value of the property by doing it up, rather than just sitting back and hoping for a rise in rentals.

Another MGPA interest is in shopping malls across the country. MGPA has achieved good results with the Malera Shopping Centre, one of the largest shopping centres in Japan, located about 40km from Nagoya, the centre of Japan’s third most populated metropolitan area.

“It has become much harder to develop large malls in Japan," says Mills. "So with no new competition being built, existing regional malls that are the strongest in their trade areas may be able to attract consumers and sales from weaker, struggling centres, some of which may close. The only cinema within 20 kilometres of Malera is planning to downsize in the near future, for example, which should boost visitors to our cinema.”

The way it looks at Japan is to regard the Tokyo market as one that functions on different dynamics from that in the rest of Japan, the latter including regional pockets where Mills thinks there may never be a recovery, such as regional suburbs populated by geriatrics where all the young people have moved away.

More broadly, he doesn’t see a return to the mid-1980s either, where an unoccupied commercial property was worth more than an occupied one in which rentals were being paid, and an income was being made on the building (on the reasoning that it would be a costly drag to winkle out the tenants if the need arose).

MGPA’s Japan Core Plus Fund closed in November 2006 with equity commitments of $865 million from 22 non-Japanese investors. That is a fund of nine years' duration, and assets under management are valued today at about ¥95 billion. Complementing that fund is ¥50 billion already allocated to Japan by a previous MGPA Asia Fund.