Tokyu Land to Acquire $450 Million of Apartments Ahead of REIT's Listing

Tokyu Land Corp., Japan’s fourth- largest developer, plans to acquire rental apartments in Tokyo worth as much as 40 billion yen ($450 million) this fiscal year for its planned real estate investment trust.

TLC Realty Management Inc., an asset-management arm of Tokyu Land, plans to list the residential REIT within two to three years, Hiroyuki Tohmata, chief executive officer of the unit, said in an interview in Tokyo. TLC will buy half of the properties from Tokyu Land and the remainder from the market by March 2011, he said.

Tokyo-based Tokyu Land is planning to list a REIT, which may be the first in Japan since October 2007, after Japanese land prices in 2009 tumbled the most in 13 years and the Tokyo Stock Exchange REIT Index suffered three straight years of declines as global financial crisis unfolded.

“We believe now is a good time to buy properties as we prepare for the listing,” Tohmata said. “When the market actually recovers, prices will become expensive.”

TLC Realty plans to acquire up to about 100 billion yen worth of real estate for the fund before listing, Tohmata said. The fund will target properties that will yield 5 to 6 percent, he said.

Japan’s nationwide average property prices dropped 8 percent to 126,000 yen a square meter (11 square feet) as of Jan. 1, 2010, from a year ago, the second annual decline in a row, according to a National Tax Agency report.

Japan’s 36 listed real estate investment trusts raised 195.5 billion yen in the first six months of this year, the highest since 2008, according to Mizuho Securities Co.

Tokyu Land’s new REIT signals a recovery in the nation’s property market, said Yoji Otani, an analyst at Deutsche Bank AG in Tokyo. The last REIT that listed in Japan was Industrial & Infrastructure Fund Investment Corp. on Oct. 18, 2007, according to data compiled by Bloomberg.

“Historically, Japan’s residential market has recovered first and then the office market,” said Otani. “We are right on that trend.”

To contact the reporters on this story: Kathleen Chu in Tokyo at Kchu2@bloomberg.net; Katsuyo Kuwako in Tokyo at kkuwako@bloomberg.net

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