Of Interest


Thursday, October 7, 2010

Property Trusts, Developers Gain on Central Bank Fund to Buy Debt, REITs

Japanese real estate investment trusts and developers rose for a second day after the Bank of Japan said it will set up a fund to buy government debt and other assets including REITs to boost the economy.

The 36-member Tokyo Stock Exchange REIT Index advanced 1.2 percent to 977.17 at the 3 p.m. close of trading in Tokyo. The 44-member Topix Real Estate Index was the third best performer among the Topix index’s 33 industry groups, rising 4.2 percent.

The Bank of Japan said yesterday it will form a 5 trillion yen ($60 billion) fund to buy government debt, commercial paper, exchanged traded funds and REITs. The plan to inject liquidity into the market may benefit Japanese REITs which have lost two- thirds of their value since May 2007 as the global financial crisis unfolded.

“The Bank of Japan’s plan to support J-REITs is very positive news,” said Hideyuki Shinkai, a Tokyo-based fund manager for Norinchukin Trust & Banking Co. “I expect the REIT index to reach 1,000 points before the end of the year.”

The BOJ said yesterday the 5 trillion yen fund will buy about 3.5 trillion yen in government debt and the remainder will be used to purchase other assets.

Sumitomo Real Estate Sales Co., a unit of Japan’s third- largest property developer, rose 6 percent to 3,955 yen. NTT Urban Development Corp. surged 4.9 percent to 73,400 yen. Leopalace21 Corp. added 7 percent to 138 yen.

Tokyu REIT Inc. advanced 1.1 percent to 455,000 yen.

Off the Peak

The REIT index lost 63 percent from its peak in May 2007 as the global credit crisis made it harder for the trusts to refinance loans and raise capital to buy properties.

The index has dropped 1.8 percent since Aug. 27, 2009, when the Ministry of Land, Infrastructure, Transport and Tourism introduced a fund that would invest as much as 500 billion yen to help J-REITs refinance their debt.

J-REITs represent about 20 percent of Japan’s 45 trillion yen securitized real estate market, government data show. The market, formed in September 2001, was created as a financial tool that pools assets into tradable securities, making investments easier and creating liquidity in the property market.

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