J-REIT is a structure for aggregated Real Estate investment with funds raised from investors, and targeted properties are managed by professional managers, with the profits distributed among the investors. Tokyo Stock Exchange has prepared for the coming of the J-REIT market.

J-REIT can be formed as either a corporation or a trust, but investment corporations may be the main form of J-REIT that will be listed on the Tokyo Exchange market. Also, there are both open-end and closed-end types of J-REITs, but listing is limited to the closed-end type.

There is a growing move toward J-REIT launching by business groups, especially leading real estate companies. Each group is planning to have its J-REIT listed on the market.

Investment corporation is required to commission an investment trust contractor to perform the asset management services.

For investment corporations, Japanese tax law allows the distribution of profits to be recorded as a loss subject to certain requirements because an investment corporation is a conduit type of vehicle. In other words, double taxation can be avoided.

When acquiring real estate, only a third of the regular registration tax and real estate acquisition tax are required to be paid.

Foreign investor’s tax obligations with regard to Japan are fully met through withholding tax at the rate of 20% on dividend from investment corporations.

The sale of investment securities by foreign investors is not taxed by Japan, except in certain circumstances.

These are principle rules as taxation of foreign investors. These conditions are changed by tax treaties between Japan and each country.

With interest rates in Japan remaining at historically low levels, the creation of J-REIT has the potential to attract both institutional and individual investors.

Even though details of J-REIT are not cleared yet but it is commonly expected that the products will generally have the following characteristics.

Product design that is oriented to medium risk and medium return.

Average distribution yield of 4% to 5% per annum.

Efforts are currently underway toward the formation of J-REITs, primarily among leading Real Estate companies. The major players are indicated on the table below. It is expected that some funds may become listed before the end of 2001, at the earliest.

Source: Council for Real Estate Syndication

Looking ahead to the creation and development of the J-REIT market as described above, Tokyo Tatemono has been searching for business opportunities in Japan’s Real Estate investment industry.

Tokyo Tatemono is forming a J-REIT Fund jointly with Taisei Corp., Asahi Mutual Life Insurance Co., and the Yasuda Mutual Life Insurance Co.

Our J-REIT Fund(FUND) will draw on a wealth of expertise built up over many years by the companies in our respective industries, including the capabilities of Tokyo Tatemono for Real Estate management and operation, the technological strength of Taisei Corp., and the Financial capabilities of Asahi Mutual Life Insurance and the Yasuda Mutual Life Insurance.

In the formation of our FUND the investment trust contractor, as the investment corporation’s asset management company, was established by the joint founding companies.

Company name: Tokyo Realty Investment Management Inc. (TRIM)

TRIM plans to meet a wide range of investor needs through Asset Management that draws on the expertise of each founding company.

At the start-up of this FUND, the four companies will provide essential properties to form a core portfolio. Outstanding assets that meet the fund's investment criteria will then be added to the start-up portfolio, and the FUND’s operation will commence this autumn. It is planned that this fund will be listed on the Tokyo Stock Exchange in the near future.

Basic Concept
The FUND will be characterized by management that has strong growth strategy. The outstanding asset management capabilities of TRIM, the investment corporation’s investment trust contractor, will be used to maximize asset value of the FUND.

Investment Criteria
This FUND invests in Real Estate and Real Estate backed securities.
<Asset types for real estate investment>
1.Office buildings and retail properties
2.The areas for investment will be dispersed around Japan, including the major cities besides Tokyo.

Growth strategy
Growth in the share value will be emphasized in constructing the growth strategy. For the portfolio growth, the FUND will engage in strategic property acquisition using the wide-ranging information routes of Tokyo Tatemono and the other founding companies. The FUND will target the combination of stable, high quality assets with properties whose competitiveness can be improved through renovation.

Scale
The initial asset scale of the fund will be 50 to 60 billion yen at the time of its establishment. The goal is to achieve a scale of about 300 billion yen in 5 years by pursuing the FUND’s strategy for asset scale expansion.

TOKYO TATEMONO Co., Ltd.
9-9,Yaesu 1-chome, Chuo-ku Tokyo 103-8285 Japan
Investment Management Division
Tel: 81-3-3274-1878
Fax: 81-3-4274-2823

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