Japan Real Estate Investment Summary -Summer/August.2010-
Japan Real Estate Investment Market Summary
Japanese lenders are experiencing most optimistic mood in the Japanese real estate market since the credit crunch in 2008.Market Forecast
Japanese REITs and major institutional investors think that major developers will be motivated to buy new projects and properties with an improving credit market. Cash rich developers are likely to be seeking good investment deals before REITs and major domestic investment entities recover from the effects of recession. In recent major developments, NTT Urban Development acquired 53.1% of Premier REIT Advisors Co. Ltd. By entering into the asset management business of J-REIT through the Transaction, the Company aims to grow the assets under management, and progressively develop and grow their core business in, “Leasing and Residential Property Sales”.
Ex-Japan Asian investors are accelerating activities in Japan. Several well known institutional investors acquired Japanese hotels in the first half of 2010.
Akihabara UDX (Developed by NTT Urban Development)
Recent Major Highlights
According to the opinion of insiders of J-REIT and domestic major players, there is off-market competition to buy A-B class office properties in Tokyo since demand is strong however supply is very limited.
Due to stable, strong demand and better opportunities to attain financial leverage, Asterisk expects market cap rate for properties to decrease for prime office buildings in Tokyo CBD. Among other significant players are non-Japanese Asian investors. Pacific Alliance Group, an Asia-focused fund investment manager, said it expects to at least double its investments in Japan over the next year or so to 500 million USD as financial institutions speed up sales of distressed assets.
On a separate note, Asterisk expects Japanese investors to take advantage of the strong yen to invest overseas for higher returns, future growth and capital appreciation. Through our client base, we have many queries about investing in oversea markets from Japanese institutional investors.
Credit market & Earnings Recovery
According to Bloomberg, Japanese lenders which suffered a decade of bad debts and loan losses after the property bubble burst in 1990, are looking to provide more loans for real estate investments as they bet prices will recover from a 36-year low.
Aozora Bank Ltd. plans to increase loans to more than a net of 100 billion yen ($1 billion) from 30 billion yen a year earlier.
Sumitomo Trust & Banking Co., expects operating profit from real estate to rise to 19 billion yen for the year ending March 2011, from 10.6 billion yen a year earlier, the bank said on its website.
Office Market
Market Status
Office leasing market may take some more time to stabilize, however a substantial majority of opinion and research indicate market consensus that Japan has passed worst times of recession and is currently in an re-adjustment stage for future growth.
In the office property investment market, deals for Core investors are becoming increasingly limited and competitive. Connections to off market property and quick decision making are key in winning prime opportunities.
Among the most recent transaction by foreign investors, AM Alpha (Germany) acquired office building in Aoyama in July. estimated transaction price is over JPY 10 billion.
On another note, the market is less limited and competitive for smaller size office buildings which are just outside of the investment criteria of large institutional investors (size, building age…etc). Smaller office buildings should be very interesting, once market activities get more accelerated. Now is a good time to make an initiative position.
Rune Aoyama Building
Occupancy Rate (e-miki.com)
*90.86% : Average central Tokyo office building occupancy (June.2010)
Market Cap rate (Central Tokyo Only)
*Office buildings in Tokyo 5 wards prime areas,built in about 10yrs, lot size is more than 10 billion JPY, cap rate is about 4.00-5.25%
*Office buildings in Tokyo 5 wards prime areas,built in about 20yrs, lot size is more than 5 billion JPY, cap rate is about 5.00-6.25%
*Smaller size office buildings (lot size : less than 1 billion JPY) : cap rate is 6.00 – 8.00%
Selected Properties (Office)
1. Central Tokyo Office Building (Minato-ku)
Completed : 2008
No. of floor: 4
Building Area : Approx. 3,000m2
Occupancy : 83%
Asking Price : JPY 2,500,000,000- (negotiable)
Net Operating Income / Cap Rate : 7.00%+
Remarks : Opportunistic / Ditressed
2 Yokohama Office Building (Yokohama-City,Kanagawa.)
Completed : 1992
No. of floor: 9
Building Area : 10,400m2
Occupancy : 82%
Asking Price : JPY 1,700,000,000-
Net Operating Income / Cap Rate : N.A
Gross Cap Rate : 12.8%
Remarks : Opportunistic
Residential Market
Market Status
Stable. Luxury condominium sales remain steadily increasing since 2008.
As the most major example, a high class luxury residence in Jingumae (Aoyama area) has sold over 80% of total units already, after long term being on market and failed to sell as a whole building at an offer of JPY 20 billion which was known as the “Cascade Project”.
The owner recently changed selling strategy to sell parts of the building as condominiums.
After an adjustment of rent levels, now occupancy of high class residential are indeed recovering.
All on-market prime residential for institutional investment are sold and gone, now “digging through off-market deals” is the only a way to access prime residential property.
Bliss Beige Jingumae (Cascade project)
Occupancy Rate (properties owned by J-REITs only)
*94% : Recent average residential occupancy in central Tokyo(April.2010)
Market Cap rate (Central Tokyo Only)
*Residential buildings in Tokyo 5 wards + Meguro & Bunkyo wards , built in about 10yrs, lot size is more than 4 billion JPY, cap rate is about 4.75-5.75%
*Residential buildings in Tokyo 5 wards + Meguro & Bunkyo wards , built in about 15yrs, lot size is more than 4 billion JPY, cap rate is about 5.50-6.25%
*Residential buildings in Tokyo 5 wards + Meguro & Bunkyo wards ,built in about 10yrs, lot size is less than 1 billion JPY, cap rate is about 6.00 – 7.00%
1. Central Tokyo Residential (Shinjuku-ku)
Completed : 2008
NO. of unit : 200+
Occupancy : 90%+
Asking price: JPY 7,000,000,000-
Net Operating Income / Cap Rate : 6.5%+
2. Central Tokyo Residential (Minato-ku)
Completed : 2005
NO. of unit : 40 units
Occupancy : 95%
Building area: Approx. 1,900m2
Asking price: JPY 991,000,000-
Net Operating Income / Cap Rate : 6.30%
Market Status
Hotel occupancies show trend of continuous recovery since the beginning of 2010.
There are some off market prime hotels which owners wish to market however lending for hotel investment is strict relative to residential and office lending and may seem difficult to attain. And some supplies from lenders.
For these reasons, offering price of some hotels have decreased.
In addition, some investors are overseeing the fact that certain lenders are preparing to provide financing for hotel deals.
Wise and well connected hotel investors know possible methods nowadays and are looking to making transactions at great price and timing.
now we see asian investors are accelerating acquisition in Japan.
Recently, limited service hotel in Tokyo CBD , up-scale full service hotel in Kobe , luxury resort hotel in Hakone were purchased by asian investors, as like Hilton Niseko Hotel purchased by YTL hotels from Malaysia.
more and more players are starting to approach Japanese hotel market also
Hilton Niseko Village
Market Statistics (May.2010)
*Tokyo Hotel : Occ.rate – 76.4% (Hotel&Restaurant magazine)
*Japan Hotel : ADR – USD 158.15 / RevPAR – USD 114.94 / Occ.rate – 72.7% (HNN)
*Please contact us or visit our website for more details.
Selected Deals
1. Limited service hotel in central Osaka
Asking price : JPY 1,800,000,000-
No. of keys : 200+
Completed : 2000
2. Full service hotel in Okinawa (Naha/downtown)
Asking price : JPY 8,500,000,000-
No. of keys : 300+
Completed : 2006
(We are dealing development sites for luxury resort development such as destination clubs and membership resorts. Please contact us about resort development in Japan.)
Lenders are primarily focusing on lending towards A-class properties
and properties with a maximum LTV of 50-60% on senior loans.
The interest rate is about LIBOR + 150-250 basis points for A and B class office buildings in Tokyo.
Asterisk Realty Inc,
Kioicho 3-29 , Glückheim Suite 2003
Chiyoda-ku, Tokyo ,
tel +81-3-3263-9909
fax +81-3-3263-9908
www.asteriskrealty.com
Asterisk Realty is a first class private Japanese real estate brokerage that markets high net worth Japanese properties to international investors seeking advisory on property development, ownership, investment and occupation. Superb off-market properties are rarely seen in the open market even during times of financial hardship. However there is a door way into the discrete market where conservative Japanese property owners welcome trusted and accredited “outside buyers”. Asterisk Realty is an exclusive gateway to build trust with foreign investment interest and introduce the best of the best off-market properties.