Japan’s Real Estate Trusts Rise from the Abyss
After a long period of uninterrupted losses, Japan’s real estate investment trusts are recovering somewhat
Japan’s 40 real estate investment trusts (Reits) are slowly and painfully recovering from their worst experience since they were introduced in 2001. However, some analysts still see major structural problems in the industry.
But the good news first. On June 29, the Tokyo Stock Exchange Reits index reached a year-to-date high, finishing at 976.16 points. On Tuesday, it had slipped back to 973.14.
In fact, the Reits market has been quietly but steadily recovering since its 2009 nadir of 704.46 points. “Recent developments contradict the picture of doom and gloom earlier this year. The sector has picked itself up from its lows,” said Alexander Jampel, a partner at Baker and McKenzie, Tokyo office. “The key point is the availability of refinancing, and here things have improved: the government has made it clear that it is determined to support the industry.”
Indeed, since April, reports have emerged that the government will establish an enormous fund to provide cash to the sector. Japan’s ruling Liberal Democratic Party has announced the fund could be as large as $8 billion. The state-run Development Bank of Japan would be a key player in such a plan, as it would contribute funds to finance real estate investments by Reits.
