NEWS RELEASE
Survey on Private Real Estate Funds in Japan
July 2014– Results
September 16, 2014
Sumitomo Mitsui Trust Research Institute Co., Ltd Starting in 2003, Sumitomo Mitsui Trust Research Institute Co., Ltd. has conducted the “Survey on Private
Real Estate Funds” as part of its research activities concerning real estate investment markets. This is the
18th survey based on responses to questionnaires received from 56 real estate investment managementcompanies.
 Survey subject: Real estate investment management companies that set up and manage private realestate funds which focused on domestic real estateThe number of companies to which questionnaires were sent: 111

The number of responses: 56 (ratio of valid responses: 50.5%)Time of survey: July 2014

Survey method: Distribution and collection of questionnaires by post and e-mailBased on the results of the survey, hearings and published information, we estimated the market size ofprivate real estate funds (on an invested asset basis) as of the end of June 2014 to be 15.5 trillion yen. This
figure involves Japanese assets of global funds (*) that we were aware of. The market size as of the end of
December 2013 was 16.1 trillion yen, which is a decrease of approximately 570 billion yen (3.6%) over a
six-month period from the previous January 2014 survey.

The market size of private real estate funds is 15.5 trillion yen including Japanese assets of global funds
・Assets under management (AUM) as of the end of June 2014 were 15.5 trillion yen, declining approximately 570
billion yen (3.6%) for half a year from the time of the previous survey. It seemed that the factor for the decline wasthat many investment management companies sold properties under the continuing strong real estate market.
・Most of the investment management companies, who did not acquire any properties from January to June 2014,
have quoted the difference in pricing and/or severe competition in bidding as their reasons for their activities. This
tells that the environment for acquiring properties remained challenging.
・This condition for acquiring properties is expected to continue. As such, we expect that investment managementcompanies will try to purchase properties at reasonable prices, through making the most of their strengths.
(*) We define “global fund” as a fund targeting real estate investments in various countries including Japan.
Assets under management（Trillion yen）

Trends of Market Size of Private Funds and J‐REITs

20

17.6

17.1

18
16

17.7

17.6

16.9

16.7

16.1

15.5

14.3

14

15.8

12

10.2

14.0

13.6

13.7

10

14.9

13.8

14.7

15.0

15.3

14.8

14.7

6
5.5
4.5

10.0

6.1

5.5

6.1
5.4

6.7
6.1

7.8

7.6

7.5

7.4

7.4

6.8

14.4
11.9

9.0

8.7

8.3

8.0

7.8

14.9
11.2

10.4

8

4

17.5

18.1

17.6

17.2

16.8

2
J‐REIT

PrivateJ‐REIT

PrivateJ‐REIT

PrivateJ‐REIT

PrivateJ‐REIT

PrivateJ‐REIT

PrivateJ‐REIT

PrivateJ‐REIT

PrivateJ‐REIT

PrivateJ‐REIT

PrivateJ‐REIT

PrivateJ‐REIT

PrivateJ‐REIT

PrivateJ‐REIT

PrivateJ‐REIT

PrivateJ‐REIT

PrivateJ‐REIT

Private0

2006/06 2006/12 2007/06 2007/12 2008/06 2008/12 2009/06 2009/12 2010/06 2010/12 2011/06 2011/12 2012/06 2012/12 2013/06 2013/12 2014/06
J‐REITsPrivate funds that only invest in domestic real estate
Private global funds (Domestically invested assets)1

News Release September 16, 2014

“ Survey on private real estate funds”

July 2014 Survey Results(Note) [n] shown in the figures throughout this document indicates the number of effective responses.

1. Current Status of Real Estate Fund Management Business
1) Breakdown of Commingled Funds and Separate Accounts
This survey categorized private real estate funds into “commingled funds” that are managed for multiple
investors, and “separate accounts” managed for single investors. AUM of the commingled funds managed by the
respondents stood at 3,131.5 billion yen (41%), while separate accounts stood at 2,408.1billion yen (31%) (Fig. 1)
Fig.1 Breakdown of Commingled Funds and Separate Accounts
100%
25%

13%

13%

80%
11%
60%

6%

26%
29%
19%

34%
37%

16%
22%

17%

27%

9%

33%

13%

36%

16%

13%
30%

28%

29%

31%

40%

41%

34%
39%

40%
64%
20%

55%

58%

50%

61%

62%

56%

58%

50%

44%

53%

0%
07/12 09/01 09/07 10/01 10/07 11/01 11/07 12/01 12/07 13/01 13/07 14/01 14/07（n=37) (n=43) （n=57) (n=51) (n=56) (n=54) (n=60) (n=54) (n=59) (n=48) (n=53) (n=47) (n=45)
Commingled funds

Separate accounts

Others2) Status of the Funds under Management – Results of the funds currently operating and agree to disclose
their data
The results of the content of currently operating funds showed that the ratio of “Fixed property type” in thefund types and that of “Core” in management style were increasing (Fig. 2 and Fig. 3). With respect to the target
property types, the ratio of “Office” increased (Fig. 4) while “23 wards of Tokyo” became more popular in termsof the targeted areas. (Fig. 5) Overall, the survey indicates that investors’ risk-on attitude, which became clear in
the previous survey, changed slightly.
As for the targeted types, in addition to “Office”, the ratio of “Industrial” and “Hotel” went up marginally. This
seems to reflect the current business sentiment and preference of the anticipation of demand associated withincreasing numbers of tourists due to the Tokyo Olympics, among other factors.
Although the ratio is still small, investment in “Facilities for the elderly” and “Health-care facilities” was also
confirmed.

2

News Release September 16, 2014

Fig. 2 Fund types

Fig. 3 Management Style

100%
11%

90%

20%

23%

12%

2%
20%

17%
32%

80%
70%

41%

32%
28%

60%
50%

8%

25%

36%

5%

30%

23%

6%

11%

37%

28%
16%

94%

2%

8%

100%
18%

18%

80%

8%
60%

10%

12%

13%

3%
11%

5%

12%

26%

2%

2%

25%

21%

23%
11%

3%

40%

12%

9%

13%

24%

12%

10%

17%

15%

14%

24%

11%

24%

13%

17%

29%

40%

30%
48%

20%

52%

56%

56%

56%

41%

63%
50%

51%

61%

67%

62%
20%

45%

55%

54%

07/12
(n=106)

09/01(n=78)

63%

64%

58%

63%

55%

45%

10%
0%

6%

0%

03/12 04/12 05/12 06/12 07/12 09/01 10/01 11/01 12/01 13/01 14/01 14/07(n=18) (n=44) (n=50) (n=44) (n=85) (n=61) (n=72) (n=62) (n=59) (n=54) (n=44) (n=39)
Fixed property type
Additional acquisition type
Discretionary investment type
Open‐ended funds

Fig. 4 Target Property Types
7%
9%

9%
19%

20%

34%

30%

43%

29%

19%
12%
36%

33%

17%
18%

36%

29%

1%
9%
10%

7%
12%

23%

22%

26%

30%

25%

34%

1%
9%
13%
20%
25%

31%

3%
12%

1%
11%

2%
1%
2%
10%

12%

15%

11%

18%

20%

18%

25%

30%

25%

28%

3%
4%
11%
22%

24%

18%

11%

23%

19%

20%

24%

25%

31%

1%
3%
3%
14%

03/12 04/12 05/12 06/12 07/12 09/01 10/01 11/01 12/01 13/01 14/01 14/07(n=44) (n=69) (n=81) (n=77) (n=164) (n=111) (n=122) (n=151) (n=123) (n=110) (n=74) (n=70)
OfficeResidential
RetailIndustrial
Hotel

Facilities for the elderly

06/12(n=45)Core

Value‐added

10/01(n=88)

11/01(n=65)

Opportunity

12/01(n=56)

13/01(n=58)Development

14/01(n=42)

14/07(n=40)

Debt

・“Debt ” was added to management investment style from the January 2013 survey.

・“Open‐ended funds” was added from the January 2011 survey.

100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%

05/12
(n=49)

Health‐care facilities

OthersFig. 5 Target Areas
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%

2%
26%

18%

31%

28%

16%
24%

16%

3%
17%
17%

22%

27%

2%
17%

1%
20%

18%

12%

11%

14%

15%

16%

48%

49%

37%

14%

8%

7%
14%

19%

14%

12%

15%

16%

22%

14%

27%

22%

20%

25%

26%

27%

19%
24%

32%

2%
15%

20%
24%

31%

4%

4%

4%
10%
13%
17%

17%
20%

19%
20%
33%

36%

25%

03/12 04/12 05/12 06/12 07/12 09/01 10/01 11/01 12/01 13/01 14/01 14/07(n=42) (n=91) (n=99) (n=83) (n=231) (n=155) (n=189) (n=169) (n=157) (n=105) (n=75) (n=70)
23 wards of Tokyo

Tokyo metropolitan area

Kinki area

Nagoya area

Local areas

Others・In the December 2003 survey, the Kinki and Nagoya areas were included in Local areas, whereas in the December 2004
survey through the December 2006 survey, the Nagoya area was included in Local areas.
・The Kinki area was called the Osaka area until the January 2009 survey. The constituent prefectures remain the same.

・In the December 2004 survey through the December 2006 survey, Industrial and Hotel types were included in“Other types.”・“Facilities for the elderly” and “Health‐care facilities” was added from the January 2013 survey.

The average target investment period of funds currently under management was 6.1 years and those of thefunds scheduled to be launched within a year was 5.9 years (Fig. 6). A six-year is becoming the mainstream
management period.
The average target asset size of funds under management was 33.2 billion yen, decreased from the previous
survey. We believe that the main reason for this is, as described above, that the ratio of the funds having fixed
properties was rising (Fig. 2) and they are relatively small.
LTV remained at a level a little higher than 65% on an acquisition price basis (Fig. 9), there is no change in thetrends in the levels below 70% the past few years. The largest number of respondents answered 75%, as in theprevious survey, it is likely that few funds have more leverage than this level under the present circumstances. It
was also confirmed that some funds financed their investment by equity only and not raised debt from the banks.
The LTV level remains stable even in a favorable financing environment and we expect it will continue in theforeseeable future.

3

News Release September 16, 2014
Fig. 6 Average Target Investment Period

Fig. 7 Breakdown of Average Target Investment Period（Years）

100%

8
7

6.4

6.0

6

5.3
4.7

5

4.4

4.3

6.1
5.3
4.8

6.4

6.1

5.9

5.9

5.2

5.0

90%

60%

30%
20%

1

10%

0

0%
03/12 04/12 05/12 06/12 07/12 09/01 10/01 11/01 12/01 13/01 14/01 14/07(n=16) (n=34) (n=43) (n=39) (n=76) (n=63) (n=63) (n=53) (n=47) (n=47) (n=30) (n=31)

76
1103

800

18%

660

47%
11%
13%

29%

36%

48%
52%

3%
20%
2%
10%
2%
04/12 05/12 06/12 07/12 09/01 10/01 11/01 12/01 13/01 14/01 14/07(n=34) (n=43) (n=39) (n=76) (n=63) (n=63) (n=53) (n=47) (n=47) (n=30) (n=31)
15%

12%

14%

19%

6%

9%
2%
4%

17%

At least three years but less than four years
At least five years but less than six years

74.2
72.3
71.0

70.9

71.3
68.9

68.2
595

66
411

333

39%

7%

68

455
386

68.6

67.4

67.6

66.2 66.4

64
332

62
03/12 04/12 05/12 06/12 07/12 09/01 10/01 11/01 12/01 13/01 14/01 14/07(n=15) (n=38) (n=33) (n=39) (n=72) (n=61) (n=51) (n=51) (n=48) (n=53) (n=37) (n=36)

003/12 04/12 05/12 06/12 07/12 09/01 10/01 11/01 12/01 13/01 14/01 14/07(n=37) (n=29) (n=47) (n=41) (n=75) (n=56) (n=64) (n=44) (n=40) (n=49) (n=28) (n=30)

Fig. 10 Average Target IRR
（%）

25
20

14.8
13.7
13.1

5

15%

33%

42%

70

843
729

400

10

35%

72

614

10%
22%

74

600

25%

37%

（%）

1200

324

16%

47%

Fig. 9 Average LTV Ratio of Existing Funds

Fig. 8 Average Target Asset Size（bil yen）

15

31%

21%
9%

28%
57%

32%

16%
21%

24%

Less than three years
At least four years but less than five years
Six years or moreFunds currently under management
Funds scheduled to be launched within a year

200

41%

20%

31%

70%

40%

3.5

8%

9%
19%

80%

2

1000

18%

50%

4.2

3.8

3

6.5

5.3

4.6

4

6.7

8.7
6.0

0
03/12 04/12 05/12 06/12 07/12 09/01 10/01 11/01 12/01 13/01 14/01 14/07(n=17) (n=35) (n=33) (n=32) (n=47) (n=61) (n=38) (n=26) (n=29) (n=33) (n=20) (n=26)
Total
Fixed property type
Additional acquisition type
Discretionary investment type
Open‐ended funds

4・The question was made if the LTV standard is based on the total investment amount or the acquisition
price. As responses based on the acquisition price made up the majority, the average value is calculated
based on the acquisition price.

News Release September 16, 2014

3) Debt FinanceRegarding debt financing, most of the investment management companies selected either “4” or “5” from thechoices. (46 of 53 votes) Also, the number of respondents that chose “5” increased from the previous January
2014 survey, which showed more companies believed the debt environment has improved (Fig. 11).
Fig.11 Circumstances of Debt Financing
175
improve

13
29

4

30
7

3

severe

9

2

0

1

0
0

1

0

5

10

15

20

July 14（Respondents 53）

25

30

35

Jan 14（Respondents 53）4) Equity Raisinga. Appetite of Equity Investors
With respect to the appetite of equity investors, as in the previous survey, no respondents answered “Declining”
in the survey this time, while the ratio of responses of “Rising” increased solidly. (Fig. 12)
As to the property type, that is considered (by respondents) to be chosen by the equity investors, Officeaccounted for 83%, Industrial, Retail for 78% and 75% respectively in the total of “Increase” and “Increase
Significantly” for the Domestic investors. On the other hand, as for Foreign investors, Office accounted for 88%,
Hotel, Retail 83% and 81% respectively. (Fig. 13-1, Fig.13-2)
The increase in the appetite to invest in Hotel is believed to reflect the increasing number of foreign tourists,
among other factors. We will pay attention to changes in the appetite to invest in commercial facilities inassociation with the trend in consumer spending after the consumption tax hike.
Fig.12 Appetite of Equity Investors
100%
80%

7%
34%

41%

60%

1%

2%
20%

45%

5%
25%

19%

18%

75%

81%

82%

40%
54%

57%

62%

83%

10%

64%
61%

40%

45%
46%
54%

20%
0%

13%
08/07
(n=54)

15%
2%
09/01
(n=48)

20%

31%

60%
44%
20%

26%

38%

09/07
10/01
10/07
11/01
11/07
12/01
12/07
13/01
13/07
14/01
14/07
(n=64) （n=55）（n=67）（n=61）（n=66）（n=58）（n=65）（n=50）（n=60）（n=54）（n=51）
RisingUnchanged
Declining5News Release September 16, 2014
Fig. 13‐1 Domestic Investors’ Appetite by Type of Target Property
Office（n=47）

2%

Retail（n=48）

8%

70%

8%

69%

Hotel
（n=46）

11%

61%

Facilities forthe elderly（n=42）

67%

5%
0%

20%

40%

Increase significantly
Decrease

60%

Increase
Decrease significantly

17%

71%

12%

28%

Residential（n=42）

10%

25%

Retail（n=40）

8%

73%

20%

22%

Industrial（n=40）

10%

68%

23%

67%

Industrial（n=49）

Office（n=42）

17%

72%

11%

Residential（n=46）

Fig. 13‐2 Foreign Investors’ Appetite by Type of Target Property

28%

Hotel
（n=41）

26%

Facilities forthe elderly 3%（n=36）

2%

80%

55%

20%

63%

2%

17%

47%

0%
20%
Increase significantly
Decrease

100%

Remain unchanged

33%

50%
40%
60%
Increase
Decrease significantly

80%
Remain unchanged

100%

b. Sources of Overseas Capital (or Foreign Funds) by Country or Region
With respect to the sources of overseas capital in investment management companies that manage the overseas
capital of foreign investors, the ratio of “Europe” decreased slightly from the previous survey, while the otherratio of responses remain unchanged (Fig. 14).
Fig. 14 Sources of Overseas Capital by Country or Region
100%
90%
80%

35%

33%

30%

31%

27%

60%
40%
30%
20%
10%

27%

24%

21%

24%

29%

21%

North America
Europe

70%
50%

23%

25%

25%

8%

10%

33%

30%
3%

0%
08/07
(n=52)

09/01(n=40)

24%

31%

24%

27%

11%

8%
6%

6%
7%

10%
9%

24%

25%

27%

6%

7%

7%

28%

24%
10%

12%

10%

12%

8%

14%

17%

27%

24%

8%
2%

2%
2%

2%

22%

Middle East

10%

China including Hong Kong

12%

Asia including Australia

22%

Asia (excl. China / M. East)

7%5%Australia

09/07
10/01
10/07
11/01
12/01
13/01
14/01
14/07
(n=61) （n=49）（n=67）（n=70）（n=59）（n=49）（n=42）（n=58）

Others・Since the January 2010 survey, Asia‐Pacific has been broken down into China, Middle East, Asia (excl. China / M East), and Australia.
・Since the January 2010 survey, China has been changed to China including Hong Kong.

6

News Release September 16, 2014

c. Reasons for Foreign Investors Investing / Not Investing in Japan (Multiple answers allowed)
As for the reasons for investors investing in Japan, many respondents pointed out economic factors andinvestment environment such as “Relatively attractive due to the yield gap” ,“Allocation as part of the global
portfolio”, “The size of the real estate market is large,” and “Highly stable income” (Fig. 15).
Majority of the respondents chose “Lack of growth potential in GDP, consumption, population, etc” and “Lackof attractive investment opportunities” as the reasons for not investing in Japan, (Fig. 16).
Fig.15 Reasons for Foreign Investors Investing in Japann=128（Respondents28）

Relatively attractive due to the yield gap

21

Allocation as part of the global portfolio

Fig.16 Reasons for Foreign Investors Not Investing in the Japanese Realn=54（Respondents25）
Estate Market
Lack of growth potential in GDP, consumption,
population, etc.

18

20

The size of the real estate market is large

Lack of attractive investment opportunities

17

Highly stable income

15

Rental market is in a recovery phase16

Low growth potential in income

812Making investments in Japan, a mature market, while
expanding investments in Asia

Low transparency in the real estate market

5

Earthquake risk

5

11

Politically and economically stable

10

Making investments in Japan as part of investment strategies
in Asia, while avoiding other cities where there are risks of afall in prices in the future

7

Highly transparent real estate market

5

Investment merits due to foreign exchanges are anticipated

Cannot embark on investment given uncertainty
in the rental market outlook

1

Declining investment value due to a contraction in
the yield gap

1

4

Income with growth potential

2

The effects of the European debt problem are relatively
limited

2

More deal opportunities

1

Increase in investment opportunities due to undervalued realestate prices

1

OthersInvestment merits due to foreign exchange are
not anticipated0

No end of the decline in real estate prices in sight0

Lack of policy consistency due to government
instability

0

Others

0

0
0
0

5

10

15

20

7

25

5

10

15

20

News Release September 16, 2014

2. Status of the Investment Real Estate Market and Investment Strategies of Managers
1). Acquisition and Disposition of Properties in the January to June 2014
With respect to the number of the properties that companies had considered to acquire (ex. verification of
profitability), as in the previous survey, the largest number of respondents answered “11~30”, followed by “10 orless”, and the other ratio of respondents remain unchanged (Fig. 17).
Fig. 17 Examined for acquisition12

10 properties or less

1115

11～30 properties

19
10

31～50 properties

7
7

More than 51 properties

90

5

July 14（Respondents 44）

10

15

20

Jan 14（Respondents 46）

The result of a survey on the acquisition and disposition of properties in the January to June 2014 is asfollows (Fig. 18 ~ Fig. 21). More than half of the respondents answered that they had acquired properties (Fig.
18). As the reason for not acquiring properties, the largest number of respondents chose “Can’t agree on prices”
followed by “Severe competition in bids” (Fig. 19). These responses showed that the environment for acquiringproperties was severe for many companies not acquiring properties, as in the previous survey.
Meanwhile, as to circumstances for disposition of properties, many respondents answered that they had soldproperties (Fig. 20). As to the reason for not selling property, all respondents answered “Did not plan to sell fromthe outset,” (Fig. 21)
It is highly likely that the environment for acquiring properties is expected to remain challenging, while thosefor selling properties is expected to be easy in the future.
Fig.18 Circumstances for Acquisitionn=31（Respondents 24）

Fig.19 Reason for not acquiring property（Respondents 54）
Can't agree on prices

17

Severe competition in bids

Didn'tacquire44%

Acquired56%

10

Did not plan to acquire from the outset

3

Did not examine, due to a limited supplyof properties in the market

0

Others10Fig. 20 Circumstances for Disposition

5

10

15

20

n=12（Respondents 12）

Fig. 21 Reason for not Selling Property（Respondents 52）
Did not plan to sell from the outset

Didn’t sellproperty
29%
Soldproperty71%

12

No inquiries despite sales activities

0

Can’t agree on prices

0

Continued to hold properties throughrefinancing, following favorable loan terms

0

Others

0
0

8

5

10

15

News Release September 16, 20142). Investment Strategies of Managers
a. Target Property Types (Multiple answers allowed)
With respect to the target property types, the ratio of “Retail” and ”Industrial” increased, while the ratio of“Office” and “Residential” continued to decrease. As in the previous survey, the responses of “Hotel” and“Facilities for elderly ” accounted for a certain ratio, the overall ratio of the target property types has not changed
significantly from the previous survey (Fig.22).
b. Target Areas (Multiple answers allowed)
With respect to the target area, the total ratio of “Central 5 wards of Tokyo” and “23 wards of Tokyo (excluding
Central 5 wards)” accounted for 50%, overall ratio remain unchanged from the previous survey(Fig.23).
However, regarding at the transition from the January 2012 survey, the total ratio of “Central 5 wards of Tokyo”
and “23 wards of Tokyo (excluding Central 5 wards)”decreased, while the total ratio of the other area increased.
There seems that the real estate investment in regional areas gradually attracts more attention, chiefly for securing
profitability in investment.
Fig. 22 Target Property Types (Multiple answers allowed)
100%
90%
80%

4%
4%
17%

1%
13%
10%

14%

11%

7%
10%

70%

15%

8%

1%
4%

1%
4%

1%
4%

6%

8%

11%

9%

10%

16%

15%
21%

22%

30%

29%

31%
27%

20%

1%
2%
9%

9%
10%

17%

30%

33%

11%

13%

20%

28%

19%

23%

17%

15%

24%

23%

27%

13%

36%

15%

15%

19%
18%

33%

9%
16%

30%
20%

1%
2%
8%

1%
3%

9%

23%

41%

40%

8%

1%
1%
4%

18%
20%

26%

1%

13%

20%

60%
50%

11%

2%
5%

44%

40%

36%

41%

38%

33%

33%

10%

26%

0%
04/12
(n=46)
Office05/12(n=69)

06/12(n=61)

07/12(n=96)

Residential

Retail09/01 09/07 10/01 10/07 11/01 11/07 12/01 13/01 14/01 14/07(n=87) (n=123) (n=119) (n=140) (n=138) (n=158) (n=160) (n=157) (n=162) (n=175)
Industrial

Hotel

Facilities for the elderly

Health‐care facilities

Others・“Facilities for the elderly” and “Health-care facilities” were newly established from the January 2012 survey.

Fig. 23 Target Areas (Multiple answers allowed)
100%

8%

90%
80%

21%

2%
8%

9%
18%
11%

25%

70%

4%

2%
7%
6%

4%
3%
7%

10%

11%

2%
2%
5%
14%

11%

60%

40%

29%

28%

29%

15%

10%

3%
3%
9%

10%
14%

4%
8%
12%

20%

30%
32%

32%

23%

23%

21%

46%
14%

04/12
(n=38)

48%

50%

47%

40%

41%

05/12
(n=51)

9%

15%

15%

21%

20%

25%

24%

26%

26%

43%
34%

11%
8%

0%

33%

6%

8%

21%

25%

5%

5%

28%

25%

30%
20%

17%

7%
5%

14%

18%
50%

3%
2%
6%

12%
24%

13%

1%
4%
3%
13%

4%
06/12
(n=55)

07/12(n=98)

Central 5 wards of Tokyo
Tokyo metropolitan area
Nagaya area
Nationwide

09/01 09/07 10/01 10/07 11/01 11/07 12/01 13/01 14/01 14/07(n=89) (n=107) (n=98) (n=131) (n=121) (n=148) (n=127) (n=122) (n=151) (n=157)
23 wards of Tokyo (excluding Central 5 wards)
Kinki area
Local cities
Others・“Nagaya area” was included in “Local cities” or “Others” until the December 2006 survey.
・The Kinki area was called the Osaka area until the January 2009 survey. The constituent prefectures remain the same.

9

News Release September 16, 2014

3. Business Environment of Private Real Estate Investment Management
1）Involvement in Open-Ended Private Funds (so-called Private REITs)
Regarding involvement in open-ended private funds (so-called private REITs), 20 companies, the largest
number of respondents, answered “Seek to develop a better understanding and gather information, but notworking on a detailed study,” (Fig. 24).
Meanwhile, 6 companies answered “Preparing for a launch after consideration.” This result suggests that the
numbers of Private REITs would increase reflecting strong appetite of equity investors (Fig. 25-1). On the other
hand, as the reason of not establishing Private REITs, the largest number of respondents answered “Decided that
acquiring properties constantly is difficult” (Fig. 25-2).
Fig.24 Managers’ involvement with Open‐ended Private Funds（Respondents 48）

Seek to develop a better understanding and gather information, but notworking on a detailed study

20

Decided not to launch after consideration but may consider again
in the future

86Preparing for a launch after consideration

Have already launched

5

Have heard of the name but not considered involvement

5

Decided not to launch after consideration, and unlikely to reconsider
in the future

40Have neither heard of the name nor considered involvement

0

5

10

15

20

25

Fig.25‐1 Reason for Having Established Open‐Ended Private Funds (choosing up to three options)This question is only for companies that chose “Have already launched” or “Preparing for a launch after consideration” to thequestion about Managers’ Involvement with Open‐ended Private Funds (the graph above).

7

Investors’ high interest in Open‐ended Private Funds

6

No constraint on the sale of properties in terms of management periods
Stable compensation in the long term

4

Favorable circumstances for equity raising

4
3

Pumping investment money into the real estate market

2

Having expertise in the establishment and management of funds

2

There is some prospect for including certain properties

1

Being able to use a sponsor pipeline
Low debt financing cost

0

Lower level of disclosure required than for J‐REITs

0
1

Others0n=30（Respondents 10）

2

4

6

8

Fig.25‐2 Reason of Not Establishing Open‐Ended Private Funds(choosing up to three options)This question is only for companies that chose “Decided not to launch after consideration but may consider again in the future”
or “Decided not to launch after consideration, and unlikely to reconsider in the future” to the question about Managers’
Involvement with Open‐ended Private Funds (the graph above).

5

Decided that acquiring properties constantly is difficult

4

Concern over conflict of interest with other funds (including J‐REITs)

3

Decided that constant equity raising is difficult2

Decided to look at the management of other funds before establishing one

2

Huge costs for establishment and initial operation
Decided that now is not the right time due to current business sentiment1

Investors being limited to qualified institutional investors

1

Focusing on the management of closed‐end funds

1

Not emphasizing income in management

0

Concern over conflict of interest with sponsors

01

Othersn=20（Respondents 12）

0

1

10

2

3

4

5

6

News Release September 16, 2014

2) Important Factors for Improvement in the Private Real Estate Funds Market (Multiple answers allowed)
With respect to important factors for improvement in the private real estate funds market in the future, thelargest number of respondents answered “Inflow of long-term investment money”, followed by “Supply of corereal estate to markets”, ”Increase in the volume of real estate transactions” (Fig.26).
n=151（Respondents 53）

Fig.26 Important Factors for Improvement in the Private Real Estate Funds Market(Multiple answers allowed)
Inflow of long‐term investment money

32

Supply of core real estate to markets

28

Increase in the volume of real estate transactions

21

Recovery of the real estate rental market

18

Supply to markets of investable real estate other than core real estate

12

Relaxation of regulations by the government

12

Steady expansion of the J‐REIT market

11

Development of investment indexes

10

Improvement in the debt financing environment

3

Increase in the number of real estate buyers

2

Inflow of short‐term investment money

1

Others

1
0

10

20

30

40

3) Manager’s Requirements for Future Growth and Sustainability of their Businesses (Multiple answers allowed)
The most common answer to the question regarding requirements for future growth and sustainability of theirbusinesses was “Strengthening property-acquisition capability”, as in the previous survey (Fig. 27).
As discussed above (refer to 2. 1), the condition for acquiring properties is expected to continue. As such, we
expect that investment management companies will try to purchase properties at reasonable prices, throughmaking the most of their strengths.
Fig. 27 Requirements for Sustainability and Growth of Managers (choosing up to three options)
38

Strengthen property‐acquisition capability
32

Enhancement of AM capabilities
14

Enhancement of equity raising capabilities

13

Enhancing the ability to handle foreign investors

12

Reinforcement of compliance structure

11

Management strategy and its explanatory ability

10

Enhancement of relations with investors
8

Enhancement of research capabilities
7

Entry into open‐ended funds business
Competence in special expertise4

Expansion of foreign real estate fund management business4
3

Expansion of target property types
2

Sufficient of information disclosure
1

Corporate strength (financial health, scale of operations)

1

Enhancement of debt financing capabilities
Capabilities for NPL investment activity

0

Strengthening of earthquake/disaster response capability02Others0
July 14（n=162 Respondents 53）

5

10

15

Jan 14（n=153 Respondents 49）

11

20

25

30

35

July 13（n=180 Respondents 60）

40

45

News Release September 16, 2014

Definitions of Terms
The definitions of terms used in this report are as follows;
Private real estate fund:A private real estate fund is a structure under which investors’ funds are managed byprofessional investment managers. In this report, commingled funds that are designed for
multiple investors, and separate accounts, investment programs for single investors are bothcategorized as private real estate funds. This does not include products governed by the Act
Concerning Designated Real Estate Joint Enterprises. Commissioned AM means only theacceptance of only asset management commissioned by funds set up by other companies,
without engaging in fund management.
Fixed property type:
A type of fund in which properties to be invested have been identified at the launch of the fund
Additional acquisition type:
A type of fund in which certain percentage of properties to be invested have been identified at
the launch of the fund, leaving additional investments after the launch usually at the discretionof manager subject to pre-determined investment guidelines
Discretionary investment type:

Closed-ended fund:Open-ended fund:

Equity commitment fund:＜Management Style＞
Core:
Opportunity :A type of fund in which the properties to be invested have not been identified at the launch of
the fund, and properties are acquired after the launch at the discretion of a manager subject topre-determined investment guidelines; Also called a blind pool typeThis refers to private real estate funds with stipulations on the management period. In principle,
this system does not allow reimbursement during the management period.
This refers to private real estate funds without stipulations on the management period.
The system enables additional investment, cancellation and reimbursement during themanagement period. The value of the holding is calculated based on the appraisal value at thetime. Open-ended funds currently managed in Japan take the form of a private RE1T.
A type of private real estate funds in which equity is contributed in block or installments
according to capital needs of the fund within the equity limit prescribed in the investment
agreement. This is also called a capital call fund.
An investment style in which stable long-term investments are envisaged by investing in soundproperties generating steady income flows.
An investment style in which a large capital gain is aimed at by investing in unprofitableproperties and selling them after increasing value with improvements.
Some of opportunity investments invest in development projects and funds that invest incompanies.

Value-added:

An investment style that lies between Core and Opportunity, and aiming at both income gains
and capital gains.

Development:

An investment style that specializes in achieving development gains.

Debt:

An investment style in which an investment is made in loans that pay the principal and interestsfrom income from real estate and real estate trust beneficiary rights. Compared with the equity
investment, the debt investment generally has a lower risk and a lower return.

＜Investment Area＞
Tokyo Metropolitan Area:
Kinki Area:

Tokyo excluding 23 Wards, Kanagawa, Saitama, and Chiba prefectures
Osaka, Kyoto, Hyogo, Nara, Wakayama, and Shiga prefectures

Nagoya Area:

Aichi, Gifu, and Mie prefectures

LTV (Loan To Value):

The Loan to Value (LTV) ratio is a ratio of debt against asset value. Asset value represents theappraisal value, actual acquisition price or total investment cost for acquisition.

Cash-on-cash yield:

The cash-on-cash yield is the yield of an annual cash flow on the total investment amount.

IRR (Gross):

The Internal Rate of Return (IRR), an indication of return on investment, is the discount rate thatmakes the present value of future cash flow of an investment equal to its original value of theinvestment.

12

News Release September 16, 2014

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105-0001, Japan
https://www.smtri.jp/en/contact/index.html
http://www.smtri.jp/en/

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including this document, are for informational purposes only, and are not intended to invite, solicit, mediate,
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Please use your own judgment when making final determinations on securities selection, investment decisions
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Forecasts, projections, or estimations included in this document are neither assured nor guaranteed. The
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SMTRI is a real estate investment advisor authorized by the related Japanese law and regulation, and conducts
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However, such calculations are for the necessity of implementing advisory services, and calculated values are
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