Merrill eyes Japan property investments in tie-up with SBI Holdings

TOKYO, Jan 18 (Reuters) US investment bank Merrill Lynch plans to increase its exposure to Japan's resurgent property market through a partnership with Japanese venture capital firm SBI Holdings Inc.

Merrill will provide up to 500 billion yen (.15 billion) in financing for SBI-backed residential development projects under the partnership agreement, SBI said in announcing the deal on Thursday.

Most of the projects are likely to be in Japan, where land prices are rebounding, but SBI will also seek investments overseas.

SBI said the partnership would take on ''profitable, large-scale deals in Japan and abroad''.

SBI's role will be to identify worthy investment targets while Merrill will arrange or directly provide financing ''on an opportunity basis'', a source close to the deal said.

Merrill's ultimate contribution will depend on the availability of suitable targets, the source said. ''Five hundred billion yen is the ceiling.'' Urban Japanese land prices have bounced back after a 15-year slide and investors have lined up to finance a construction boom in office towers, apartments and shopping complexes that is transforming parts of Tokyo and other cities.

The boom has drawn parallels with Japan's disastrous 1980s land and stock price bubble, though bankers say stricter regulation and more sophisticated financing tools have cut the risks this time around.

On Wednesday, Nomura Holdings Inc., Japan's biggest securities brokerage, and the government-affiliated Development Bank of Japan (DBJ) said they would create a 0 million equity fund to buy stakes in real estate development companies.

REUTERS CS KP1325