International real estate portfolio investors from the United States to Singapore are increasingly looking to buy property in Japan with over $2 billion in deals already agreed this year, it is claimed.
Tokyo is proving particularly popular with apartments among the best selling classes of real estate at present, according to experts. But other sectors are also seeing increased sales.
‘Hotels, Tokyo offices, Tokyo residential, I would say, will be the three specific sectors and opportunities that are being most sought after by international investors,’ said Alistair Meadows, Asia Pacific director for International Capital Group at global property services firm Jones Lang LaSalle.
Buyers who have already declared their interest include Mapletree Investments, the real estate arm of Singapore’s state investor Temasek Holdings , with close to $1 billion in new cash earmarked for office buildings, data centers and research and development facilities.
Also looking are American private equity firms Blackstone Group and Fortress, Germany’s Deutsche Bank and US based Jones Lang LaSalle’s funds arm LaSalle Investment.
Franklin Templeton is understood to be looking to buy a portfolio of distressed loans at a discount, which would provide attractive returns and allow access to physical assets, while Blackstone plans to buy Morgan Stanley ’s loans which are backed by commercial real estate such as office buildings.
Wealthy Chinese investors are also increasingly looking to Japan and a number of travel agencies have started offering Buy Japanese Property tours. Realtors say major foreign private equity groups, real estate trusts and realtors have earmarked an estimated $6.6 billion for investments in Asia, showing interest in Japan’s bricks and mortar assets and property debt.
‘While we are cautious around the country’s fundamentals, we do believe that the sheer size of the market allows for opportunities,’ said Peter Kim, managing director, ING Real Estate Investment Management, which has funds invested in Japan.
A bottoming out of real estate prices and a recovery in the debt market are some positives investors are buying into. In a clear indication that office buildings values are set to grow, cap rates, the income that the property will generate divided by its value, have stopped rising.
‘We reiterate our view that cap rates will decline in the second half of 2010 and that real estate prices are very likely to rebound,’ Barclays Capital said in a recent report note.
Distressed or marked down properties in Japan, such as debt backed by commercial real estate, are also emerging on the radars of foreign buyers. ‘We are finding a degree of success in finding deals through trust banks or lenders who have taken control of over leveraged assets,’ said Jacques Gordon, global investment strategist at LaSalle Investment Management.
As foreign money pours in, the real surge in buying may just be starting, according to Mark Brown, a real estate analyst at researcher Japaninvest. The gap between what distressed property owners are asking and the amount buyers are willing to pay is closing fast, he said, adding that would lead to plenty of new deals.