Investors Big on Japan Real Estate

Investors Big on Japan Real Estate
http://www.zacks.com/stock/news/4004...an+Real+Estate

With the bottoming out of real estate prices and a recovery in the debt market, foreign investors are increasingly favoring Japanese real estate over others. Over $2 billion worth of investment deals were inked since late last year with more in the pipeline.

Mapletree Investments, the real estate arm of Singapore's state investor Temasek Holdings, is one of the leading foreign investors who have shown interest in the Japanese real estate sector with nearly $1 billion earmarked for acquisition of office buildings, data centers, and research and development facilities in the country. The growing list also includes The Blackstone Group (BX - Snapshot Report), an asset management and financial advisory services provider; Fortress Investment Group LLC (FIG - Snapshot Report), a publicly owned investment manager; Deutsche Bank (DB - Snapshot Report), a leading financial firm; and LaSalle Investment Management, the investment management business of Jones Lang LaSalle Inc. (JLL - Analyst Report).

According to industry experts, major foreign private equity groups, real estate trusts and realtors have apportioned an estimated $6.6 billion for investments in Asia, primarily focusing on Japan. Furthermore, the cap rates of Japanese real estate are expected to decline in the second half of 2010. Investors are also keen to acquire distressed or marked-down properties, such as debt backed by commercial real estate, with rental rate of office space in Asia-Pacific expected to rise between 10% and 30% in 2010.

Jones Lang had earlier stated in its report that office rentals in Asia have increased strongly, with net absorption or change in occupied office space in Tier I cities rising 13% sequentially from the previous quarter to 4.3 million square feet. Jones Lang has a dedicated research team that provides in-depth analyses on the region’s property markets to assist and inform developers and investors, fund managers, and lenders. It also offers clients insights into the emerging shape of the regional real estate markets and places them in the perspective of global trends.

Jones Lang operates as a single-source provider of real estate solutions with a broad range of real estate products and services, and an extensive knowledge of domestic and international real estate markets. The company faces stiff competition from international, regional and local players in the market due to which it has to continually invest in value drivers that act as key differentiators. Consequently, the company is under severe stress to maintain its profitability. We maintain our Neutral rating on Jones Lang, which currently has a Zacks #3 Rank that translates into a short-term Hold recommendation.

Tokyo Landlords Lose Century-Old `Gift Money' as Rents Slump

http://www.bloomberg.com/news/2010-0...-year-low.html

After viewing almost 100 Tokyo apartments, banker Damien Cambon was happy to discover that a Japanese tradition dating back more than a century is dying: the payment of up to two months’ rent extra as a gift to the landlord.
“Reikin,” or “gift money,” a non-refundable fee on top of a deposit and any broker fees that has helped boost landlords’ earnings since at least 1897, is the latest victim of a slump in the market in the world’s second-most expensive city. Rents in Tokyo’s five central wards fell to an average 4,165 yen per square meter in June, the lowest since the Japan Real Estate Institute started tracking prices in 1998.
“My broker would say, ‘forget about the gift money,’ and the landlords would all say, ‘OK,’” said Cambon, 29, who works for a U.S.-based bank he declined to name. “This was a very good surprise.”
As Prime Minister Naoto Kan considers injecting as much as 4.6 trillion yen ($55 billion) into the economy to create jobs, boost consumption and stem 12 years of deflation, Tokyo landlords are also trying to stimulate the rental market by scrapping reikin and waiving as much as five months’ rent for new leases.
“The rental property business is changing,” said Yoshiya Watanabe, a real estate agent at Atland co. in Tokyo. “If you eliminate reikin, you get better turnaround” for vacant units.
While landlords of luxury Tokyo apartments rented for 500,000 yen or more have waived reikin in the past, as many as 65 percent of units below that tier now don’t require gift money, compared with about 25 percent two years ago, Watanabe said.
Rooftop, Terrace
Cambon said his previous landlord lowered his rent 13 percent at the end of his two-year lease and waived the contract renewal fee of one-month rent. Even so, he opted for a new apartment with a terrace and rooftop access.
The September 2008 bankruptcy of Lehman Brothers Holdings Inc. and the recession that followed prompted a drop in occupancy rates, said Hirotaka Uruma, chief financial officer at Daiwa House Morimoto Asset Management Co. The company oversees BLife Investment Corp., a residential real-estate investment trust that manages 8,116 apartments in Tokyo.
“Waiving reikin has become the norm,” he said. “When your competitors are also waiving it, it doesn’t make sense for us to keep demanding it.”
BLife’s residential occupancy rates in Tokyo’s five central wards dropped to 85 percent in November from 94 percent a year earlier, he said. In the same period, gift-money income as a proportion of total revenue for BLife dropped to 0.3 percent from 1.65 percent, Uruma said.
‘Doesn’t Make Sense’
“In the long run, reikin will completely disappear because this is a system that doesn’t make sense,” said Yoji Otani, a real estate analyst at Deutsche Bank AG in Tokyo. Eliminating the fee “will make it easier for tenants to move around, which is good for brokerage companies, but bad for residential REITs.”
Gift money dates back to as early as 1897 when it was documented in a contract for a property in Tokyo’s Chiyoda ward, according to “Japan’s Rental Property (1995),” a book by Nobuhisa Segawa, a law professor at Hokkaido University. The practice originated to offset rising land prices while ensuring rents for new tenants weren’t substantially different from what their neighbors were paying, according to Segawa. Reikin income is typically split between the broker and owner.
Landlords who are holding on to the practice, also known as “key money,” include those who have inherited their property and are less concerned about vacancy, Watanabe said.
Not in New York
Demanding key money is illegal in New York, according to the New York City Rent Guidelines Board. The practice is no longer prohibited in England, though landlords typically don’t charge a “premium,” which gives tenants the right to assign tenancy to a third party, according to Tessa Shepperson, a lawyer in Norwich.
Tokyo Governor Shintaro Ishihara said in a 2004 policy statement that reikin as well as contract renewal fees should be eliminated. While the city’s position has not changed, it can’t legally force landlords to abolish the fee, said Kazuo Onoda, who works on the city’s efforts to improve housing policies. The decline of reikin “is a result of market forces,” he said.
Even after Japan’s land prices tumbled the most in 13 years in 2009, Tokyo is still the second-most expensive city in the world for expatriates behind Luanda, Angola, based on Mercer LLC’s Cost of Living Survey released in June that compares housing, food, gasoline, movie and other prices. Rent for a mid- range two-bedroom unfurnished apartment in Japan’s capital averaged $4,436 a month, compared with $3,906 in London and $4,000 in New York, according to the study.
Reikin’s Return?
Some landlords say reikin payments may return once Japan’s property market recovers.
“At the moment, new supply is very limited,” said Atsushi Ogata, chief executive officer of Nomura Real Estate Asset Management Co. which manages a residential and an office REIT. “In a couple of years, we may face another good market, with demand outpacing supply, in which case we can probably charge as much reikin as before.”
Total gift-money income dropped by about half on average in March and April, when the majority of new tenants move in, from a year earlier, Ogata said.
Meanwhile, it’s a tenants’ market in Tokyo, as rent has dropped by as much as 15 percent since 2007, said Mikihisa Hirai, president of Tokyo-based Atlas Partners Japan Ltd., which owns more than 2,000 apartments in Nagoya, Osaka and Tokyo.
“In order to attract new tenants, owners would rather forget the gift money, especially when properties are owned by funds,” he said. “Investors can no longer count on reikin.”

Tokyo Landlords Lose Century-Old `Gift Money' as Rents Slump

http://www.bloomberg.com/news/2010-0...-year-low.html

After viewing almost 100 Tokyo apartments, banker Damien Cambon was happy to discover that a Japanese tradition dating back more than a century is dying: the payment of up to two months’ rent extra as a gift to the landlord.
“Reikin,” or “gift money,” a non-refundable fee on top of a deposit and any broker fees that has helped boost landlords’ earnings since at least 1897, is the latest victim of a slump in the market in the world’s second-most expensive city. Rents in Tokyo’s five central wards fell to an average 4,165 yen per square meter in June, the lowest since the Japan Real Estate Institute started tracking prices in 1998.
“My broker would say, ‘forget about the gift money,’ and the landlords would all say, ‘OK,’” said Cambon, 29, who works for a U.S.-based bank he declined to name. “This was a very good surprise.”
As Prime Minister Naoto Kan considers injecting as much as 4.6 trillion yen ($55 billion) into the economy to create jobs, boost consumption and stem 12 years of deflation, Tokyo landlords are also trying to stimulate the rental market by scrapping reikin and waiving as much as five months’ rent for new leases.
“The rental property business is changing,” said Yoshiya Watanabe, a real estate agent at Atland co. in Tokyo. “If you eliminate reikin, you get better turnaround” for vacant units.
While landlords of luxury Tokyo apartments rented for 500,000 yen or more have waived reikin in the past, as many as 65 percent of units below that tier now don’t require gift money, compared with about 25 percent two years ago, Watanabe said.
Rooftop, Terrace
Cambon said his previous landlord lowered his rent 13 percent at the end of his two-year lease and waived the contract renewal fee of one-month rent. Even so, he opted for a new apartment with a terrace and rooftop access.
The September 2008 bankruptcy of Lehman Brothers Holdings Inc. and the recession that followed prompted a drop in occupancy rates, said Hirotaka Uruma, chief financial officer at Daiwa House Morimoto Asset Management Co. The company oversees BLife Investment Corp., a residential real-estate investment trust that manages 8,116 apartments in Tokyo.
“Waiving reikin has become the norm,” he said. “When your competitors are also waiving it, it doesn’t make sense for us to keep demanding it.”
BLife’s residential occupancy rates in Tokyo’s five central wards dropped to 85 percent in November from 94 percent a year earlier, he said. In the same period, gift-money income as a proportion of total revenue for BLife dropped to 0.3 percent from 1.65 percent, Uruma said.
‘Doesn’t Make Sense’
“In the long run, reikin will completely disappear because this is a system that doesn’t make sense,” said Yoji Otani, a real estate analyst at Deutsche Bank AG in Tokyo. Eliminating the fee “will make it easier for tenants to move around, which is good for brokerage companies, but bad for residential REITs.”
Gift money dates back to as early as 1897 when it was documented in a contract for a property in Tokyo’s Chiyoda ward, according to “Japan’s Rental Property (1995),” a book by Nobuhisa Segawa, a law professor at Hokkaido University. The practice originated to offset rising land prices while ensuring rents for new tenants weren’t substantially different from what their neighbors were paying, according to Segawa. Reikin income is typically split between the broker and owner.
Landlords who are holding on to the practice, also known as “key money,” include those who have inherited their property and are less concerned about vacancy, Watanabe said.
Not in New York
Demanding key money is illegal in New York, according to the New York City Rent Guidelines Board. The practice is no longer prohibited in England, though landlords typically don’t charge a “premium,” which gives tenants the right to assign tenancy to a third party, according to Tessa Shepperson, a lawyer in Norwich.
Tokyo Governor Shintaro Ishihara said in a 2004 policy statement that reikin as well as contract renewal fees should be eliminated. While the city’s position has not changed, it can’t legally force landlords to abolish the fee, said Kazuo Onoda, who works on the city’s efforts to improve housing policies. The decline of reikin “is a result of market forces,” he said.
Even after Japan’s land prices tumbled the most in 13 years in 2009, Tokyo is still the second-most expensive city in the world for expatriates behind Luanda, Angola, based on Mercer LLC’s Cost of Living Survey released in June that compares housing, food, gasoline, movie and other prices. Rent for a mid- range two-bedroom unfurnished apartment in Japan’s capital averaged $4,436 a month, compared with $3,906 in London and $4,000 in New York, according to the study.
Reikin’s Return?
Some landlords say reikin payments may return once Japan’s property market recovers.
“At the moment, new supply is very limited,” said Atsushi Ogata, chief executive officer of Nomura Real Estate Asset Management Co. which manages a residential and an office REIT. “In a couple of years, we may face another good market, with demand outpacing supply, in which case we can probably charge as much reikin as before.”
Total gift-money income dropped by about half on average in March and April, when the majority of new tenants move in, from a year earlier, Ogata said.
Meanwhile, it’s a tenants’ market in Tokyo, as rent has dropped by as much as 15 percent since 2007, said Mikihisa Hirai, president of Tokyo-based Atlas Partners Japan Ltd., which owns more than 2,000 apartments in Nagoya, Osaka and Tokyo.
“In order to attract new tenants, owners would rather forget the gift money, especially when properties are owned by funds,” he said. “Investors can no longer count on reikin.”

Fortress Investment Sees Opportunities in Japan as Banks Sell Properties
http://www.bloomberg.com/news/2010-1...ty-market.html

Fortress Investment Group LLC, which has $41.7 billion of assets under management, said there are investment opportunities in the Japanese real estate market because some banks may sell properties as loans come due.

“The distressed space in Japan today is extremely compelling,” Thomas Pulley, managing director at Fortress Real Estate (Asia) GK, said at the Real Estate Investment World conference in Tokyo yesterday. “We believe the opportunities for Fortress are significant.”

“A fair portion” of $50 billion worth of real estate will have to be sold in the next three to five years as loans backed by those properties come due, according to Tokyo-based Pulley. Some Japanese banks may have to sell properties that were used as collateral as real estate values in Japan fall about 30 percent to 40 percent, he said.

Real estate values in Tokyo started to drop after they peaked in the fourth quarter of 2007 as global financial crisis unfolded. Property owners and funds, facing declining property prices, will either have to inject new capital or return properties to lenders as collateral when property loans are due.

Total commercial mortgage debt in Japan this year will reach a record high 1.12 trillion yen ($14 billion), a 59 percent increase from last year, according to an estimate by Moody’s Investors Service.

Fortress, based in New York, closed the Fortress Japan Opportunity Domestic Fund in June at 75 billion yen, saying it would invest in real estate debt and other assets in Japan over the next 12 months, according to a statement distributed by Business Wire.

Fortress Real Estate this month hired Douglas Smith, former head of real estate financing at Deutsche Bank AG in Tokyo, as a managing director to oversee its property investment advisory business, according to three people familiar with the situation.

Japan property luring Asia's wealthy, says HSBC
http://www.reuters.com/article/idUSTRE6941QF20101005

(Reuters) - The number of HSBC's (HSBA.L) wealthy Asian customers interested in buying Japanese real estate has doubled this year, the head of the bank's Japan private banking business said on Tuesday.

In doing so they are vying with the local rich, who have always had a penchant for land and buildings, for prime locations in Tokyo and other Japanese cities.

Luring them in to Japan's property market are signs of a rebound in real estate prices and a stable market that contrasts with more volatile markets elsewhere.

"They are looking for the really good pinpoint locations," Masahide Ohashi told Reuters in an interview for the Reuters Global Private Banking Summit in Tokyo.

Residential properties in particular are popular because there is no risk of losing a major tenant that may occupy several floors of a building, Ohashi said.

As foreigners pile into Japanese real estate, some of their local counterparts are spilling overseas in a bid to diversify their holdings out of poor-performing stocks at home and away from an overreliance on the yen, Ohashi said.

Popular alternatives, he added, are the U.S. dollar, followed by the euro and Australian dollar assets.

That trend has helped HSBC's private banking business grow by more than 10 percent by assets over the past year. Ohashi declined to say how much HSBC holds in its private banking business. Other foreign bankers also winning business as Japan's wealthy tap their overseas expertise, Ohashi added.

CRAVING STABILITY

But with a combined market share of just a few percent, according to the HSBC banker, foreign-run private banking still has a long way to go to catch up with local securities companies and other financial companies in tapping Japan's reservoir of family riches.

In 2005, according to Nomura Securities' research unit, there were 52,000 households in Japan worth at least 500 million yen with overall assets amounting to 46 trillion yen. It's that group that HSBC targets.

Those with between 100 million and 500 million have another 167 trillion yen spread over 810,000 families.

The erosion in stock values, the core holding of most of Japan's rich, and a slide in other asset values means wealth levels are likely back to what they were in 2005, Ohashi estimates.

Yet, many of those rich Japanese, aren't interested in the best returns, craving stability instead. They tend to be older than their counterparts in China and other parts of emerging Asia and worry more about succession planning, Ohashi said.

In order to adapt to the demands of their aging customers, HSBC, which markets itself as a "the world's local bank" has even invited doctors from the prestigious Stanford University Medical Center to give advice on coping with Alzheimer's and other ailments afflicting the old.

Japan Sets Interest Rates at 0
Global monetary policy reaching end of road
http://mainstreetbusinessjournal.com...me=13&issue=31
By Dr. Jerome Corsi
Japan's central bank has launched a 5 trillion yen ($60 billion) effort to buy a wide range of debt, including government bonds, corporate IOUs, real-estate investment trust funds and exchange-traded funds, setting off global concerns that central banks around the world are prepared for more quantitative easing.

This came as the dollar hit fresh lows, reaching a record low against the Swiss franc, a 27-year low against the Australian dollar and a 15-year low against the Japanese yen................

Leaving for Japan shortly to meet with my Japanese realtor..I will bring my Geiger counter along of course..lol

Japanese Real Estate Opportunity?
THU 17 MAR 11 | 02:18 PM ET
There may be opportunity in Japanese real estate, which has been hit extremely hard, with Jonathan Litt, Land and Buildings principal. When does a tragedy become a business opportunity?
http://video.cnbc.com/gallery/?video=3000011123

Just recently returned from Osaka, Japan !! I signed a real estate contract to purchase a local commercial property. This is the first time in my life that I had to sign a contract with "geiger counter" near by !!

Tokyo firms eye moving to Osaka
http://search.japantimes.co.jp/cgi-b...0110319a3.html