| <Dawn
of New Era of Japan’s
Real Estate Investment
Market>
Based on the recognition
that activation of the
real estate investment
market is essential for
economic recovery, beginning
last year and continuing
into this year, the SPC
Law was enacted and the
Real Estate Syndication
Law was amended providing
major liberalization.
Although many areas of
insufficiency remain with
regard to the liquidity
of real estate, steady
progress is being seen
in system infrastructure
building. (See Volumes
5 and 6 of our Market
Report.)
As stated above, the long-term
decline in land price
levels has begun to result
in a marked trend for
foreign corporations to
purchase real estate for
investment purposes.
| Purchase
of Real Estate for Investment
Purposes by Foreign Corporations |
DATE |
INVESTOR |
PREVIOUS
OWNER |
PRICE
(yen) |
SUBJECT
PROPERTY |
| Mar.
98 |
Morgan
Stanley |
Daikyo |
12
billion |
Rental
condominiums |
| Mar.
98 |
Goldman
Sachs |
Yamato
Life Insurance |
60
billion |
Head
office |
| Feb.
99 |
Whitehall
Fund (U.S.) |
Toho
Life Insurance |
30
billion |
Head
office |
| Apr.
99 |
AIG
and others |
Japan
Energy |
70
billion |
Head
office |
| Apr.
99 |
Secured
Capital and others |
Nippon
Landic |
36
billion |
13 buildings |
In the past in Japan,
the sale of a building
had been regarded negatively.
However, this is now coming
to be seen in a positive
light as a business strategy,
as outstanding companies
achieve asset liquidity
through the sale of owned
real estate. Naturally,
these transactions are
performed according to
the profit return price
based on future rental
income, and this is expected
to provide the impetus
for outstanding real estate
to come onto the real
estate investment market.
Not only foreign companies,
but also Japanese real
estate companies and financial
institutions are becoming
interested in a real estate
investment market. Domestic
players are already becoming
active as the developers
of real estate investment
products and as investors
in these real estate investment
products.
Improvements in the system
infrastructure, lower
real estate prices, entry
of outstanding real estate
into the market and the
emergence of enthusiastic
players, are all signaling
the dawn of a new era
in Japan’s real estate
investment market.
<Importance
of Investment in Outstanding
Properties>
In real estate investing
under these circumstances,
the most important factor
is the identification
of outstanding properties.
Since beginning of the
’90s, the prices of some
properties have fallen
to one-half to one-tenth
of their peak values.
In our view, it is important
for real estate companies
to identify the following
from the large amount
of information on properties
for sale: [1] properties
which are valued by the
market at less than their
actual income-producing
capability, [2] properties
which could be greatly
increased in value through
renovation and [3] properties
in which performance growth
results from improvement
of management.
The recovery of property
value is expected to spread
to the market as a whole,
first beginning with outstanding
properties, and then gradually
broadening in scope while
entering the investment
capital market and producing
exponential results. Through
this process, the distinction
between outstanding properties
operated by good asset
managers and other properties
will become clearer through
market price. |
