Japan’s real estate investment trusts fell, with the Tokyo Stock Exchange REIT Index dropping the most in eight weeks, after 10-year Japanese government bond yields rose to 1 percent for the first time in a year.
The REIT index declined 5.2 percent to 1,403.09 at the close in Tokyo, the biggest slide since April 1. The Topix Real Estate Index that tracks developers had the biggest decline in two years, falling 10 percent.
Japan’s 10-year yield increased seven basis points, or 0.07 percentage point, to 0.955 percent in Tokyo, according to Japan Bond Trading Co. The yield rose as high as 1 percent earlier, a level unseen since April 5, 2012. The increase in yield narrows the spread with the dividend returns of the 39 real estate investment trusts listed on the Tokyo Stock Exchange.
“Investors reacted negatively to the interest rate,” said Yoji Otani, an analyst at Deutsche Bank AG in Tokyo. “The outlook for growth for the real estate market has not changed, so the decline in REITs poses a good buying opportunity.”
The REIT index trades at a 3.5 percent yield, according to data compiled by Bloomberg.
Global One Real Estate Investment Co. declined the most on the REIT index, falling 8.1 percent to 576,000 yen, the biggest drop in four-and-a-half years. Nomura Real Estate Office Fund Inc. lost 7.3 percent to 533,000 yen, the biggest drop in eight weeks.
REITs derive most of their profit from rental income, paying out the majority as dividends. While investors receive a yield that is competitive with bonds, they can also benefit as the value of the underlying properties rises.