Dalton to raise $950 mln

By Nathan Layne

TOKYO (Reuters) - Activist fund Dalton Investments KK said it could raise up to about $450 million to invest in struggling Japanese real estate investment trusts (REITs) and another $500 million for a management buyout fund.

Junichiro Sano, head of the Japan affiliate of California-based Dalton Investments LLC, said the timing was right to invest, with REITs on average trading at a 35 percent discount to the value of property on their books.

Tokyo's REIT index has lost nearly half its value since a peak last May, hit by the global credit crisis and signs of weakness in the property market. Several REIT listings have been cancelled in recent months due to the slump.

"We really like real estate and at the same time we really need the concept of distress," Sano told the Reuters Japan Investment Summit, adding that overseas investors had already committed $300 million for the distressed REIT fund.

It wants to raise another $150 million in Japan, Sano said.

Dalton will look to buy into mid-sized REITs while steering clear of those affiliated with Mitsui Fudosan Co and Mitsubishi Estate Co as ties with Japan's top two property firms usually ensures they trade at a higher valuation.

It will then look to boost the stock price by improving corporate governance. Steps could include pressuring REITs to hold shareholder meetings, dispatching directors and resolving conflicts of interest between REITs and their parent firms.

In some cases Dalton might push for a rebalancing of the assets, Sano said.  Continued...