JAPAN Trends and Developments Contributed by: Hiroshi Niinomi, Koki Hara, Naoto Yamamoto and Mitsuhiko Murata, Nishimura & Asahi (Gaikokuho Kyodo Jigyo)
legislative movement to relax the regulation on PTS operators dealing non-listed securities. Redevelopment Projects Urban redevelopment projects A large number of redevelopment projects have been undertaken in metropolitan areas in accordance with the Urban Redevelopment Act (the “Act”), including large-scale redevel - opments in major metropolitan areas in Tokyo (Roppongi, Azabu, Shibuya, etc). The purpose of the Act is to promote greater use of urban land and to facilitate the renewal of urban functions. The Act has the unique features of (i) enabling the participation of developers who are devel - opment professionals and (ii) covering project costs by selling the rights in surplus portions obtained from such redevelopment or allocating such rights to developers who do not have rights to the property before redevelopment. Without the Act, it would be difficult to proceed with redevelopment projects due to the chal - lenge of aligning the interests of various rights holders for small-scale land and buildings in project areas while also covering project costs. Although individuals, redevelopment associa - tions, and local governments can be entities who carry out urban redevelopment projects, redevelopment associations are used in many cases, and the procedures generally involve (i) an urban planning decision, (ii) preparation and approval of a project plan, and (iii) rights conver - sion, which is the main procedure for redevel - opment projects and is a process of converting existing rights in existing real property into rights in newly redeveloped real property. Use of SPC In recent years, as the total development costs of large-scale redevelopment projects have increased, there has been a trend toward an
increasing number of projects that not only involve the participation of professional con - tractors or developers but also use a real estate securitisation structure, such as a TK-GK struc - ture or TMK structure, to finance part of the pro - ject costs. There are several ways in which an SPC can be involved in a redevelopment project, including the SPC becoming a participant in a redevelopment association or the SPC becom - ing an acquirer of surplus floor space after rede - velopment. In this case, the difficulty is high because both knowledge of real estate liquida - tion schemes and knowledge of redevelopment projects are required. TK-GK and TMK struc - tures are regulated by the Financial Instruments and Exchange Act or the Asset Securitization Act, respectively, neither of which is directly related to development-related laws and regu - lations. For example, at the time of approval of a business plan, the authorities may require that an SPC submit a letter of support from a sponsor in terms of the SPC’s credibility to be involved in the project for a long period of time. Issues in relation to increased development costs In addition to the increased scale of develop - ment projects, there are various other factors that increase development costs. The main fac - tors are considered to be the soaring cost of construction materials due to the post COVID-19 increases in prices and the weakened yen, as well as the difficulty in securing human resourc - es. The fact that the employment regulations, such as the overtime limit, which were initiated as part of the work-style reform, will apply from 1 April 2024, after a five-year grace period for the construction industry, which has a chronic shortage of human resources, an ageing work - force, and long working hours, is another factor contributing to the difficulty in securing human resources. Those factors also seem to make it
496 CHAMBERS.COM
Powered by FlippingBook