Tokyu Land to Start $1.8 Billion Japan Property Fund Next Year

Tokyu Land Corp., Japan’s fourth-largest developer, will start a 150 billion yen ($1.8 billion) real estate investment trust next year as the Bank of Japan’s asset-buying program helps the nation’s property market recover.

Tokyu Land plans to start the REIT that will invest in offices and commercial buildings across the country in the first half of next year, said Hideyuki Takada, a managing director at the company, in an interview in Tokyo yesterday. The firm aims for the fund’s asset value to increase to as much as 300 billion yen, he said.

The Bank of Japan said last year it would allocate 50 billion yen from its asset-buying fund to purchasing shares of Japanese REITs as part of efforts to end a decade of deflation. The Tokyo Stock Exchange REIT Index, which has lost more than half its value since a peak in 2007, has gained 16 percent since the central bank’s announcement.

“Tokyu Land’s creation of the new REIT can be taken positively as part of the company’s expansion strategy,” said Mitsuyoshi Takahashi, an analyst at Mizuho Securities Co. in Tokyo. “Japanese REITs are raising capital through equity financing on the back of a recovery in the REIT market.”

J-REITs, as Japanese REITs are known, may double property purchases in the next fiscal year to 1 trillion yen, from as much as 600 billion yen during the current fiscal year ending March, according to Masahiro Mochizuki, a Tokyo-based analyst at Credit Suisse Securities (Japan) Ltd. The central bank’s economic stimulus will create an environment where developers can raise capital more easily for property acquisitions, he said.

Expanding Business

The TSE REIT Index has fallen 57 percent since a record high in May 2007 as the global credit crisis made it harder to refinance loans and raise capital to buy properties.

Tokyo-based Tokyu Land also is planning a REIT that will invest in residential properties, Takada said, declining to elaborate as it is still in the planning stage.

“We aim to expand our asset management business” by starting several REITs and investing in a wide variety of assets, he said.

J-REITs represent 20 percent of Japan’s 45 trillion yen securitized real-estate market, according to the most recent government data published in August. The market was created in 2001 to be a financial tool that pools assets into tradable securities, making it easier to invest. A total of 35 REITs are included in the Tokyo Stock Exchange REIT Index, with no new listing since 2007.