Japanese REITs to Double Amount of Share Sales in 2012, Deutsche Bank Says

Japanese real estate investment trusts are set to double the amount of capital they raise through share sales this year, spurring a recovery in the nation’s real estate market, according to Deutsche Bank AG.

Japanese REITs (TSEREIT) may sell as much as 500 billion yen ($6.2 billion) worth of shares through secondary offerings in 2012, compared with the 223.8 billion yen they sold last year, said Yoji Otani, an analyst at Deutsche Securities Inc. in Tokyo. A total of 91.8 billion yen of share sale has already been announced so far this year, he said.

Japan Real Estate Investment Corp. (8952) and Nippon Building Fund Inc. (8951) are among J-REITs that have announced plans this year for public offerings to fund property acquisitions and pay down debt. Real-estate transaction among J-REITs rose 31 percent to 714.4 billion yen in 2011 from a year earlier and compares with 246.8 billion yen that changed hands in 2009, the lowest since 2002, according to Deutsche Securities.

“An increase in capital raising is a sign of recovery in the property market,” Otani said in a telephone interview yesterday. “The market has bottomed in 2009 and the recovery is likely to accelerate this year.”

The Tokyo Stock Exchange REIT Index rose 1.7 percent at the close in Tokyo to the highest level in almost five months.

Japan Real Estate Investment, the country’s second-biggest property trust, said earlier this week it plans to raise as much as 39 billion yen. It plans to use the proceeds to pay for Asakasa Park Building in Tokyo it had acquired in November for 60.8 billion yen from Mitsubishi Estate Co., Japan’s second- biggest developer.

Others to Follow

Nippon Building, the country’s largest REIT, last month said it plans to raise 20.9 billion yen for six office buildings that cost a total of 22.7 billion yen as well as future purchases. Advance Residence Investment Corp. (3269) will sell 15.8 billion yen worth of shares to finance 15 apartments that cost 23.5 billion yen, while Industrial & Infrastructure Fund Investment Corp. (3249) is planning a 17.5 billion yen sale.

The Bank of Japan’s decision for additional monetary easing and setting an inflation target of 1 percent will help boost land prices in the six major cities by 10 percent, Otani said in a report dated Feb. 15.

The number of sites in Japan where land values were unchanged or increased in the last three months outnumbered spots that fell for the first time in 3 1/2 years, helped by recovering demand around Tokyo bay area housings, a land ministry survey yesterday showed.

The REIT Index has gained 9.6 percent so far this year, while the 46-member Topix Real Estate Index has risen 27 percent.

“The wall formed by the overly pessimistic outlook of investors is starting to crumble,” Otani said in a separate report dated yesterday. “The real estate sector has entered a period of rising share prices.”

To contact the reporter on this story: Kathleen Chu in Tokyo at kchu2@bloomberg.net

To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net

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