Reits in Japan

Overview of the Japan-REIT Market: REITs in Japan are getting a significant portion among twenty-one countries in the world, with the fifth largest market capitalization of 36.5 billion U.S. dollars, which constitutes around a 6% share of the global REIT market as of March 2012. However, because the REIT market in Japan has only an eight and a half year history, and many of the research works on the market have been limited in Japanese, its characteristics have not become widely known to the world.

When REITs are viewed as equity, investors will often leave the sector to their equity groups and, rather than funding an independent allocation, may accept the exposure they get naturally through their allocations to small-cap, mid-cap and, more recently, large-cap allocations. On the other hand, if REITs are viewed as real estate, then the REIT investment may reside in the real estate allocation, earning a place in a separate sleeve that complements the fund’s private property investments, or for retail investors, serves as the sole source of real estate exposure.

Brief History:

An REIT is an investment trust dedicated to owning, and in most cases, operating income-producing real estate, such as apartments, shopping centers, offices and warehouses. Most REITs raise equity capital from investors, but have a special tax status that allows them to avoid corporate tax as long as nearly all REIT-income is distributed to investors in the form of dividends. This REIT structure enables small business transactions with a high liquidity and a transparent price in real estate investment.

Japan-REITs (J-REITs) started in May 2000, when the revision of the Investment Trust and Investment Corporation Act (ITICA) expanded a trust’s target assets, which used to be limited to

marketable securities, into real estate. Two J-REITs were first listed on the Tokyo Stock Exchange (TSE) on September 10, 2001 .Then capitalization of the J-REIT market grew rapidly to 60 billion U.S....