(TOKYO) Japan’s real estate investment trust (Reit) bond market is starting to thaw after two years as the economy rebounds, though property prices would need to rise for a full recovery, according to Fitch Ratings.

‘New bond sales are recovering to some extent,’ Toru Kobayashi, Tokyo- based director of structured finance at the risk assessor, said in an interview.

Some Reits still face risks, he said. These need to see ‘improvements in property performance’,

Sales of Reit bonds this year totalled 124.5 billion yen (S$1.96 billion), recovering from a single public sale of three billion yen in 2008 and none in 2009, according to data compiled by Bloomberg.

The Tokyo Stock Exchange Reit Index has gained 0.6 per cent this year, while the Topix index has dropped 9.1 per cent.

Land prices started falling in 2008 as the global crisis deepened with the collapse of Lehman Brothers Holdings Inc, previously a lender to property investors.

New lending for real estate by Japan’s banks fell to the lowest in a decade in 2009, according to the Bank of Japan.

‘Among some borrowers with a smaller size or inferior financial standings, we see extension of short loans or finance in the short term,’ Mr Kobayashi said. ‘Such Reits haven’t eased their finance risk.’

Japan’s Ministry of Land, Infrastructure, Transport and Tourism said in August 2009 that a 500-billion-yen fund would be formed to help Reits refinance their debt. – Bloomberg

Source: Business Times, 24 Aug 2010

MAPLETREE Logistics Trust has signed a binding memorandum of understanding (MOU) with Kabushiki Kaisha A-Max to acquire three properties in Japan, its manager Mapletree Logistics Trust Management (MLTM) said yesterday.

The properties are the Iwatsuki Logistics Centre, a distribution centre and office in Iwatsuki, with a gross floor area (GFA) of 30,000 sq m; the Iruma Logistics Centre, a distribution centre and office in Iruma, with GFA of 26,000 sq m, and Noda Logistics Centre, a distribution centre and office in Noda, with GFA of 36,000 sq m. All the locations are in Saitama Prefecture, which is Toyko’s northern neighbour.

The properties will be acquired for a total of 13 billion yen, (about S$200 million). The vendor, A-Max, is a logistics facilities development and management company.

The acquisition is the sixth announced by Mapletree since December last year, totalling $430 million.

With the completion of all of these acquisitions, MapletreeLog will have a portfolio value of about $3.3 billion.

MLTM said the latest acquisition will have significant benefits arising from attractive net property income (NPI) yield and distribution per unit accretion. The properties are also 100 per cent leased for eight to 10 years, providing stable rental income, and are in good locations.

‘Given the low interest rates in Japan, it is likely that this acquisition will be funded predominantly by debt,’ said MLTM. ‘Any proceeds from equity issuance will likely be applied towards other acquisitions or refinancing of other more expensive debt in the portfolio to maintain a gearing below 45 per cent.’

MLTM chief executive Richard Lai said: ‘Japan’s logistics market remains attractive to us because it has breadth and depth that is currently unmatched elsewhere in Asia. We will continue to expand our portfolio in Japan by selectively acquiring yield-accretive logistics assets of good quality and location. We also seek to enhance the quality of our income stream through addition of good-quality customers to our diversified customer base. We will continue to focus on such accretive third-party acquisitions as a key strategy to grow our portfolio, and in turn, the returns to our unit-holders.’

Source: Business Times, 29 Jul 2010

Mainboard-listed healthcare trust Parkway Life REIT (PLife REIT) has acquired five new nursing home properties in Japan for some S$46.8 million.

The properties will be bought from Yugen Kaisha, which is a subsidiary of Kenedix, a real estate asset manager in Japan.

PLife REIT had previously acquired 15 nursing home properties from Kenedix.

It said it is buying the properties because they are well-equipped, in good physical condition and strategically situated in dense residential districts.

PLife REIT added that each of the properties has a long term lease agreement with the operators, with a weighted average lease term to expiry of 17.45 years

It also said the stability of the overall portfolio will be further enhanced with backup operator agreements to be secured for the properties.

Furthermore, PLife REIT said Yugen Kaisha will provide a rental income guarantee in respect of the properties for a period of seven years capped at 5 percent of the purchase price.

Such a move will offer protection to PLife REIT and provides certainty for PLife REIT’s future distributions to its unitholders.

The acquisition is expected to be fully funded via a five-year committed unsecured revolving credit facility of up to S$48.5 million.

PLife REIT is expected to enter into an interest rate swap to hedge the interest rate for five years.

Source: Channel News Asia, 13 Jul 2010

(TOKYO) Average land prices in Japan fell 8 per cent in the year to Jan 1, the biggest drop in more than a decade, a government agency said, in a sign the country’s real estate market is still reeling from the global financial crisis.

The 2008 financial crisis and the recession that followed in Japan have battered demand for housing, while tight credit has made it hard for developers to raise money and overseas investors have withdrawn their funds.

It was the second straight year of decline in nationwide land prices, which averaged 126,000 yen ($1,993) per square metre, after a 5.5 per cent drop the year before, according to the survey by the National Tax Agency, which covered about 380,000 building lots.

That marked the biggest decline since an 8.3 per cent fall in the year to Jan 1, 1997, with land prices down in all Japan’s 47 prefectures last year.

Tokyo suffered the biggest drop of 11.3 per cent, which was its fastest rate of decline in 14 years.

The cost of a land plot in Tokyo’s upscale Ginza shopping district plunged 25.6 per cent, its biggest slide in 16 years, though it is still the most expensive place in Japan at 23.2 million yen per square metre.

Japanese land prices had dropped for years following the collapse of the real estate bubble in the early 1990s, leaving huge piles of bad loans in the banking sector and crippling the economy for a decade.

They finally began picking up in the mid-2000s, helped in part as foreign investors poured money into urban developments.

But the upturn was short-lived as the global financial crisis shook the market in 2008.

Property prices in Tokyo and its neighbouring prefectures fell 9.7 per cent. In the vicinity of Osaka in western Japan, land prices dropped 8.3 per cent, while those in the central Japanese city of Nagoya and its neighbouring areas tumbled 7.6 per cent.

Average land prices in rural areas also fell 5.9 per cent.

The tax agency assesses land prices as of Jan 1 every year to calculate inheritance and gift taxes on properties that are acquired that year.

Land prices calculated by the tax agency are roughly at 80 per cent of those published by the land ministry in March.

Analysts say the prices tend to lag behind actual land price movements. — Reuters

Source: Business Times, 2 Jul 2010

It acquires 6 new properties for 3.9b yen

PARKWAY Life Reit (PLife Reit) has strengthened its foothold in Japan.

The healthcare trust, whose $1.15 billion portfolio includes private hospitals in Singapore, announced yesterday the acquisition of six new nursing home and care facility properties in Japan for 3.9 billion yen (S$60.5 million).

The two companies that sold these properties are Kabushiki Kaisha Sawayaka Club and Kabushiki Kaisha Bonheure.

They are subsidiaries of Kabushiki Kaisha Uchiyama Holdings, a Japan-based company in the nursing homes, family karaoke and F&B businesses.

Black Hills Investment, a private real estate asset management firm, will be appointed as the asset manager of the properties.

‘With an 8.08 per cent net property yield, this acquisition is yield-accretive to our unitholders,’ said Yong Yean Chau, chief executive officer of the Reit’s manager Parkway Trust Management Ltd.

The expected net property yield from these properties compares favourably to the current property yield of 6.97 per cent for PLife Reit’s existing Japan portfolio.

The six new properties are valued at 4.04 billion yen, using the discounted cashflow method. The purchase price is 2.8 per cent below the valuation.

Each of these properties will have a fresh 20-year master lease/operating lease agreement with Sawayaka, currently the largest private nursing home operator in Kyushu Island.

PLife Reit said the long lease term will improve the total portfolio weighted average lease term to expiry (by gross revenue), which stands at 13.2 years as at March 31, thus boosting the resilience of its portfolio.

To mitigate the risk of any potential rental defaults, Uchiyama and Bonheure will provide rental income guarantees for the properties for the entire lease period.

Uchiyama and its subsidiaries have also entered into a memorandum of understanding to give a right of first refusal to PLife Reit over future sales of nursing homes owned by them.

PLife Reit noted that this arrangement will enhance its growth potential in Japan. It is now adopting a clustering acquisition and partnership approach to achieve critical mass and reap economies of scale in its core markets, starting from Japan.

Mr Yong said the Reit manager will also continue to explore future acquisition or collaboration opportunities with Uchiyama, such as having them as backup operators or replacement operators for the other nursing homes in PLife Reit’s portfolio.

The acquisition is expected to be fully funded via a five-year unsecured term loan facility of 4.2 billion yen from CIMB Bank Berhad, one of the Reit’s key partner banks.

This loan is at an all-in funding cost of about 2 per cent per annum, better than the recent similar financing PLife Reit obtained in November 2009 at 3.22 per cent per annum.

With this funding, PLife Reit’s gearing will rise to 32.2 per cent from 28.5 per cent as at March 31.

Source: Business Times, 10 Jun 2010

CAPITALAND’S wholly owned serviced residence business unit, The Ascott Limited, will open its second Citadines property in Japan on Monday.

The new Citadines Kyoto Karasuma-Gojo comes a year after the launch of Ascott’s Citadines Tokyo Shinjuku in March 2009.

Lee Chee Koon, Ascott’s managing director for North Asia, said that that property has achieved strong average occupancy of around 80 per cent. ‘It has also received many positive reviews from customers. Hence, we’re expanding our Citadines brand to another key city in Japan.’

The 124-unit Citadines Kyoto Karasuma-Gojo offers studio and one-bedroom apartments with contemporary decor, modern fittings, a fully-equipped kitchen, a home entertainment system and broadband Internet access.

It is located in Gojo, a short walk from the city’s business district and tourist belt where there are many shopping malls, supermarkets, restaurants and entertainment facilities. Renowned Unesco World Heritage sites the Kiyomizu Temple and Toji Temple are less than a 10-minute drive away.

The property is also near Gojo subway station. And Kyoto’s largest downtown shopping area, Shijo Street, and the Kyoto Shinkansen bullet train station are just one stop away. Shijo Street has a wide range of shops, from traditional craft outlets to boutiques carrying designer fashion.

Ascott said its latest property will cater to strong demand for quality accommodation in Kyoto, which is a popular tourist destination and a venue for international conventions.

With this project, Ascott’s portfolio in Japan will increase to over 3,800 apartment units in 53 properties across 10 cities including Tokyo, Kyoto, Osaka, Nagoya, Kobe and Hiroshima.

Source: Business Times, 6 Mar 2010

The US and Japan are expected to see the biggest rise in distressed property sales in the first quarter, as the fallout from the global property downturn intensifies, the results of a survey showed yesterday.

By contrast, respondents in Brazil, India, Hong Kong and Australia are more optimistic and expect fewer distressed property listings, the Royal Institution of Chartered Surveyors (RICS), which surveyed 430 of its members in 25 countries, said.

RICS, which last polled its members in the final quarter of 2009, defines distressed properties as those with a foreclosure order or are advertised for sale by their mortgagee, and which tend to fetch a lower price than their market value.

It said that the net balance of 85 per cent more respondents in the US polled during the fourth quarter expect distressed property sales to rise in the first three months of 2010, compared with about 68 per cent in Q3.

The turnaround was even more distinct in Japan, where the net balance of respondents predicting an increase in distressed sales this quarter jumped from 12 per cent in the Q3 2009 poll, to 80 per cent in the Q4 poll.

Rounding out the top five markets expected to be worst hit by distressed sales this quarter are Ireland, Scandinavia, and Spain, the survey showed.

It is the major property markets of the world, namely the US and Japan, where agents expect the strongest growth in distressed sales in the first quarter of 2010,’ Oliver Gilmartin, RICS senior economist, said.

RICS also asked its members whether the levels of interest from specialist funds that buy distressed properties was rising, finding that 21 out of 25 countries saw increased interest, with interest in Spain, Ireland, the UK, and the US rising at a faster pace.

‘Significantly, whilst the US is seeing ongoing rises in interest from specialist funds, Japan is not the recipient of the same level of investor appetite for distressed property assets,’ Mr Gilmartin said.

Source: Business Times, 2 Mar 2010

Mapletree Logistics Trust has signed a conditional sale and purchase agreement to buy a warehouse in Japan for about S$68 million (JPY4.36 billion).

The yield of the property at 7.26 per cent is higher than the implied property yield of the existing Japan portfolio of 4.5 per cent.

The acquisition will be accretive to MapletreeLog’s distribution per unit (DPU).

The proforma financial effect of the acquisition on the annualised DPU (based on actual 9 months financial results for 2009) is an additional 0.103 Singapore cents or 1.75 per cent.

Source: Business Times, 28 Dec 2009

People struggling to repay mortgages; more buyers as prices are falling

Auctions of foreclosed homes in Tokyo rose to a five-year high as more people struggle to repay their mortgages, Sanyu Appraisal Corp said.

The number of homes sold at auctions supervised by the Tokyo District Court increased 22 per cent to 2,795 in the six months ended Sept 30, from the preceding six months ended March 31, the Tokyo-based property appraiser said.

‘More people are submitting bids to buy foreclosed properties because the prices are falling,’ Hirohisa Hagino, managing director of Sanyu, said by telephone yesterday.

The number of bidders more than doubled to 18,171 in the same period. ‘This is the highest since we began compiling data in 2003,’ Mr Hagino said.

Of the 2,795 properties auctioned, 87.6 per cent were bought, an increase of 12 percentage points from the six months ended March 31.

‘Buyers are showing strong appetite for condominiums on expectations the market will recover,’ Mr Hagino said. He said 93 per cent of condominiums offered at auction were sold in the six months ended Sept 30.

Source: Business Times, 17 Dec 2009

Rents for first-class offices in Tokyo will likely bottom out in the first half of 2010 and foreign investors have already begun hunting investment opportunities in the city’s property market, a report said.

The average rent for Tokyo’s grade A offices fell 35 per cent by September from the recent peak in March 2008 and nearing levels seen in 2003 and 2004, property adviser Jones Lang LaSalle said.

Looking ahead, however, the city’s premier office rents are likely to bounce higher in the first half of 2010 after falling to within 10 to 20 per cent of the bottom seen in 2004, thanks to limited supply, the report said.

A recovery in the office market would also likely lift investor sentiment as well as banks’ willingness to lend, the report said.

‘Foreign investors had been sitting on the sidelines in 2009 because of a falling rents and higher yields. But investors, especially those managing foreign pension funds, have begun mulling over re-entry given signs of improvement in the market,’ LaSalle said.

‘We believe we will witness a return of those investors to the country’s property market in early 2010′ it said.

Source: Business Times, 17 Dec 2009