JAPAN Trends and Developments Contributed by: Hiroshi Niinomi, Koki Hara, Naoto Yamamoto and Mitsuhiko Murata, Nishimura & Asahi (Gaikokuho Kyodo Jigyo)
Nishimura & Asahi (Gaikokuho Kyodo Jigyo)
Otemon Tower 1-1-2 Otemachi Chiyoda-ku Tokyo 100-8124 Japan
Tel: +81 3 6250 6200 Fax: +81 3 6250 7200 Email: info@nishimura.com Web: www.nishimura.com
REITs REIT market overview
No IPO of a listed J-REIT has occurred since 2021, although more than 22 public offerings (totalling approximately JPY313 billion) have been executed through 2023. The market value of listed J-REITs has softened, and the ratio of REIT market price to REIT net asset value is below 1.0 in many J-REITs. Influenced by changes in the investment environment due to COVID-19 and other factors, there is some movement in the J-REIT market, including mergers of REITs, and portfolio rebalancing that has reduced returns for office portfolios and in contrast, increased returns for portfolios of other assets classes. Hostile takeovers Hostile takeovers of J-REITs are among the key trends in the current REIT market. There were some M&A transactions between J-REITs before 2019; however, they were all friendly mergers conducted through agreements between all rele - vant parties (including the sponsors). Many were carried out between J-REITs under the same sponsors or affiliated sponsors in an effort to increase their assets under management (AUM), expand the types of their assets, and/or stream - line their business.
The REIT market has generally shown steady growth. As of the end of 2023, the total value of real estate held by REITs, including private REITs, has reached approximately JPY28.7 tril - lion (on the basis of acquisition price), and the aggregate market capitalisation of listed J-REITs was about JPY15.4 trillion. The growth of private REITs has played a role in the Japanese REIT market, with private REITs holding properties valued at about JPY6 trillion (based on acquisition price) in December 2023. As of the end of 2023, there are 54 private REITs, ranging from diversified REITs (ie, those diver - sifying their portfolio in multiple asset types) to sector-specific REITs (eg, focused on residential, hotel or logistic properties). Sponsors from vari - ous business fields have initiated private REITs. Railroad companies, electric power and gas companies, financial institutions (including insur - ance companies and banks), and other indus - tries are also engaging in the management of REITs or are interested in doing so.
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