Point-1 Birth of Koizumi Administration
The advent of the Koizumi Administration was the biggest event in Japan’s political and economic scene during 2001. Prime Minister Junichiro Koizumi has been pushing his policy of “No Growth Without Reforms”.

Point-2 Accelerating NPL Disposal
Since the launch of the Koizumi Administration, initiatives to address the non-performing loans (NPL) problem have accelerated. The process of weeding out low credits rating companies in the construction and retailing industries (i.e. Mycal Corporation & Aoki Corporation) has already begun.

Point-3 Backlash by Reluctant Forces within the LDP
During the first half of 2002, we should pay attention to the pro-status quo LDP elements within Koizumi’s administration which have been resisting his initiatives. The removal of former Foreign Minister Makiko Tanaka last January was due to pressure from these anti-reform forces within the LDP. Mr. Koizumi has to control this internal opposition.

Point-1 Aggressive Investment
Some international real estate investors and J-REIT funds aggressively invested in central Tokyo office buildings. In the first half of 2001, international investors aggressively invested in class-A properties. Some of these include insurance companies’ portfolios. (For example, Chiyoda Life, Tokyo Life, etc. )
J-REIT funds became price leaders in the second half of 2001. J-REIT requires considerable assets in order to have the liquidity demanded by investors in a listed market. To achieve this, they needed to increase their asset base, and so set out to acquire Tokyo CBD properties aggressively. Examples are NKK headquarters in Otemachi (NBF: Mitsui Fudosan’s J-REIT, acquired in March), portfolio of Nippon Landic (ORIX’s J-REIT, acquired in November), and so on.

Point-2 Creation of a Seller’s Market
As a result of Point 1, a seller’s market has been created, even though more properties were put on the market than in previous years.

Point-3 Upwards Trend of Properties Price
Therefore, the price for Tokyo CBD offices showed a strong upwards trend, and the market cap rate for them going below 5%.

Point-1 Changing it’s Aggressive Position --- J-REIT
It will be difficult for J-REIT to take the same aggressive position as seen last year, thus appearing more bearish.
The two J-REITs which were launched in September last year were initially priced at par value plus premium. But, Japan’s stock market has further weakened, which has undermined J-REITs value.
Currently, both funds are converging on their par values of around \500,000 per share. (As a result, their yields are in the upper regions of five percent.) It is expected that J-REIT will purchase properties after considering their investment risk equivalent to stock price, while observing listed price.

Point-2 Rapid Increase in Properties for Sale
At present, as we approach the end of fiscal 2001 (March 31), many properties are being placed on the market. Investment and financial professionals (lawyers, accountants, etc.) have been very busy handling this rapid increase in properties for sale.

Point-3 Changing Market Trends
Market conditions are changing. We should realize that the market will change from a sellers market to a sound market which is balanced between seller and buyer.

Investment Strategy-1
-Investing in Class-A competitive properties-
2002 will offer greater opportunities to purchase class-A properties for a reasonable price, compared to 2001.

Investment Strategy-2
-Investing in potential properties, and selling them after adding value-
Tokyo Tatemono can control the risks involved in a high potential real estate investment strategy, and this offers a great opportunity for investors.

Consulting a well-informed investment advisor like TOKYO TATEMONO is your key to success for property investment.