K.K. daVinci Advisors, the operator of Japan's biggest real estate fund, said yesterday it had bought the office portion of the Pacific Century Place Marunouchi building in central Tokyo from Hong Kong tycoon Richard Li's Pacific Century Group for US$1.7 billion.

This is the largest single-asset transaction in Asia, according to people familiar with the deal.

DaVinci says it now manages 1 trillion yen (US$8.54 billion) in assets with the purchase. Its shares extended gains after the news, ending up 8.7 per cent at 113,000 yen.

"We will continue to seek out good investments so as not to miss out on opportunities in Tokyo's real estate market which is undergoing a remarkable turnaround," the fund said in a statement.

The purchase comes at a time when Japan rental prices are on an uptrend and vacancy rates in central Tokyo have fallen to their lowest levels in a decade. Data this week also showed average land prices in the nation's top three cities rose for the first time in 16 years thanks to an economic recovery and robust investment by real estate investment trusts.

DaVinci launched a 1 trillion yen fund earlier this year, investing in office buildings and collecting asset management fees.

Credit Suisse analyst Yoji Otani estimated the annual rental income for the building's office space at about 6 billion yen, valuing its cap rate at around 2 per cent.

The space has a net lettable area of 39,102 square metres (420,900 square feet).

"DaVinci must be confident that they can raise rents," he said.

(HK Edition 11/21/2006 page3)