NEWS RELEASE
Survey on Private Real Estate Funds in Japan
January 2015– Results
March 17, 2015
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
19th survey based on responses to questionnaires received from 56 real estate asset managers.
 Survey subject: Real estate investment asset managers that set up and manage private real estate
funds which focused on Japanese real estateThe number of questionnaires sent: 110

The number of responses: 56 (ratio of valid responses: 50.9%)Survey period: January 2015

Survey methodology: Questionnaire survey sent by post and e-mail Based 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 December 2014 to be 15.1 trillion yen.
This figure involves Japanese assets of global funds (*) that we were aware of. The market size as of theend of June 2014 was 15.5 trillion yen, which means a decrease of approximately 360 billion yen (2.3%)
over a six-month period from the previous June 2014 survey.
The market size of private real estate funds is 15.1 trillion yen including Japanese assets of global funds
・ Assets under management (AUM) as of the end of December 2014 were 15.1 trillion yen, declining
approximately 360 billion yen (2.3%) for half a year after the last survey.
・While domestic private real estate funds shrank, the market was supported by an increase in global private funds
based chiefly on overseas funds. We have found that there are a number of overseas investors that are attracted to
the yield gap in the Japanese real estate market and those are willing to allocate funds to real estate in Japan in
their global portfolios.
・Since the survey at the end of December 2012, the market size of private real estate funds has been shrinking.
Although acquiring properties in the real estate trading market remains difficult, a number of asset managers areplanning to acquire properties within a year or to set up their funds. Against this backdrop, the market of private realestate funds is expected to grow.
(*) 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

14.8

14.7

15.0

15.3

5.5
4.5

10.0

6.1

5.5

6

6.1
5.4

6.7
6.1

7.8

7.6

7.5

7.4

7.4

6.8

14.4
12.6

11.9

11.2

15.1
13.4

9.0

8.7

8.3

8.0

7.8

14.9

14.7
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

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 2014/12
J‐REITsPrivate funds that only invest in domestic real estate
Private global funds (Domestically invested assets)1

News Release March 17, 2015

“ Survey on private real estate funds”

January 2015 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 3,164.9 billion yen (46%), while separate accounts at 2,468.0billion yen (36%) (Fig.1)

Fig.1 Breakdown of Commingled Funds and Separate Accounts
100%
25%

13%

13%

11%
60%

6%

26%

80%
29%
19%

34%
37%

16%
22%

17%

27%

9%

33%

13%

36%

16%

13%
30%

28%

29%

31%

40%

41%

18%

34%
36%

39%

40%
64%
20%

55%

58%

50%

61%

62%

56%

58%

50%

44%

53%

46%

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 15/01（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) (n=43)
Commingled funds

Separate accounts

Others2) Status of the Funds under Management – Results of the funds currently operating and agree to disclose
their data
The response from the currently operating funds showed that “fixed asset type,” by fund type and “core” bymanagement style continued to have a majority. (Fig.2 and Fig.3) By target property type, the share of “office”
and “residential,” the two major types of investment properties, declined (Fig.4). In terms of the targeted area,“23wards of Tokyo” fell (Fig.5) its share. Overall, the asset managers have tried to manage the funds that will likely
achieve their planned cash flows as expected but the availability of the properties which would meet their target isforgather limited. Thus, in our view, competition for acquiring those properties is intensifying and they are
expanding their investment scope nations and are investing in operational assets and properties in the local cities.

2

News Release March 17, 2015
Fig. 2 Fund types

Fig. 3 Management Style

100%
11%

90%

12%

20%

23%

2%
20%

17%
32%

80%
70%

41%

32%
28%

60%
50%

8%

25%

5%

8%

30%

23%

6%

11%

37%

28%

36%

2%

100%

5%

18%
18%
8%

22%

80%

13%

60%
3%

40%

9%

10%

12%

12%

3%
11%

5%

2%

2%

25%

21%

12%

26%

17%

23%
11%

16%

94%

12%

11%

13%

24%

24%

14%
11%

0%
9%

15%

18%

13%

16%

17%

29%

24%

10%

40%

30%
48%

20%

56%

52%

56%

56%

41%

63%
50%

51%

61%

67%

62%

62%
20%

55%

45%

63%

54%

64%

58%

63%

57%

14/07
(n=40)

15/01(n=54)

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 15/01(n=18) (n=44) (n=50) (n=44) (n=85) (n=61) (n=72) (n=62) (n=59) (n=54) (n=44) (n=39) (n=55)
Fixed property type

Additional acquisition type

Discretionary investment type

05/12
(n=49)

90%
80%
70%

7%
9%

9%
19%

20%

19%
12%

17%
18%

1%
9%
10%

7%
12%

23%

22%

60%
50%
40%

34%

43%

36%

36%

26%

25%

1%
9%
13%
20%

3%
12%

1%
11%

12%

15%

11%

18%

20%

18%

25%

25%

10%

3%
4%
11%
22%

25%
23%

30%
20%

30%

29%

33%

29%

30%

34%

31%

30%

28%

31%

20%

1%
3%
3%
14%
24%
11%
19%
24%

23%
22%
17%
20%

03/12 04/12 05/12 06/12 07/12 09/01 10/01 11/01 12/01 13/01 14/01 14/07 15/01(n=44) (n=69) (n=81) (n=77) (n=164) (n=111) (n=122) (n=151) (n=123) (n=110) (n=74) (n=70) (n=98)
Residential

RetailIndustrial

Hotel

Value‐added

11/01(n=65)

12/01(n=56)

Opportunity

13/01(n=58)

14/01(n=42)Development

Debt

Fig. 5 Target Areas
0%
1%
4%
11%

0%

Office10/01(n=88)

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

2%
1%
2%
10%

18%
25%

Core

Open‐ended funds

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

Fig. 4 Target Property Types
100%

06/12 07/12 09/01(n=45) (n=106) (n=78)

Facilities for the elderly

Health‐care facilities

Others・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.

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

2%
26%

3%
18%
31%

28%

16%
24%

16%

17%
17%

22%

27%

2%
17%

1%

4%

20%

18%

12%

11%

14%

15%

16%

19%
24%

48%

49%

32%
14%

37%

20%
24%

31%

27%

25%

16%
22%

26%

2%
15%

7%

4%

14%

19%

14%

12%

15%

22%

14%

20%
27%

4%
10%
13%

15%

17%
20%

17%
20%

19%

23%

20%
33%

2%
15%

25%

36%

24%

8%

03/12 04/12 05/12 06/12 07/12 09/01 10/01 11/01 12/01 13/01 14/01 14/07 15/01(n=42) (n=91) (n=99) (n=83) (n=231) (n=155) (n=189) (n=169) (n=157) (n=105) (n=75) (n=70) (n=104)
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 average investment period of the funds currently under management was 7.7 years and the targeted
investment period of the funds scheduled to be launched within a year was 6.9 years (Fig.6). These results showthat investment periods were getting longer in general.
The average target fund size of the funds under management was 55.1 billion yen, increased from the previous
survey (33.2 billion yen) (Fig.8). Compared with the previous survey (July 2014), the percentages of “additional
acquisition type” and “discretionary investment type” rose (Fig.2), and we assume that this rise is one of thereasons of the increase in the average target fund size.
LTV remained at a level a little higher than 65% on an acquisition price basis (Fig.9).There was no significant
change in this survey. It was also confirmed that some funds financed their investment by equity only and no debt
raised from the banks. We believe that the number of the funds having large amounts of loan is small and thetrend to manage investment at a stable LTV will continue for some time to come.

3

News Release March 17, 2015
Fig. 6 Average Target Investment Period

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

100%

9

7.7

8
7

6.4

6.0
4.7

5

4.3

4.4

6.1
5.3

3.8

6.4

4.8

4.2

90%

5.9

6.1

60%

5.9

8%

30%

3.5

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 15/01(n=16) (n=34) (n=43) (n=39) (n=76) (n=63) (n=63) (n=53) (n=47) (n=47) (n=30) (n=31) (n=38)

32%
31%

16%

15%

（%）

1200

76

33%

39%

7%
42%

10%

47%
11%

18%

13%

29%
9%
2%
4%

36%

48%
52%

29%
3%
10%

20%
5%
2%
5%
2%
04/12 05/12 06/12 07/12 09/01 10/01 11/01 12/01 13/01 14/01 14/07 15/01(n=34) (n=43) (n=39) (n=76) (n=63) (n=63) (n=53) (n=47) (n=47) (n=30) (n=31) (n=38)
15%

12%

14%

19%

6%

17%

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

74.2

74

1103

71.0

72

800

70.9

72.3
71.3

70

843

68.9

68

729
660

614

37%

61%

25%

22%
35%

47%

Fig. 9 Average LTV Ratio of Existing Funds

Fig. 8 Average Target Asset Size（bil yen）

600

28%
57%

21%
9%

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

68.2

66

595

400

386

333

66.2 66.4

68.6

67.4

66.0

67.6

64

511

455

411
324

20%

31%

16%
21%

40%
20%

200

41%

50%

2

1000

9%
19%

70%

5.2

5.0

18%

80%
6.9

4.6

4
3

6.5

5.3

5.3

6

6.7

62

332

60
03/12 04/12 05/12 06/12 07/12 09/01 10/01 11/01 12/01 13/01 14/01 14/07 15/01(n=15) (n=38) (n=33) (n=39) (n=72) (n=61) (n=51) (n=51) (n=48) (n=53) (n=37) (n=36) (n=47)0・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.

03/12 04/12 05/12 06/12 07/12 09/01 10/01 11/01 12/01 13/01 14/01 14/07 15/01(n=37)(n=29)(n=47)(n=41)(n=75)(n=56)(n=64)(n=44)(n=40)(n=49)(n=28)(n=30)(n=45)

Fig. 10 Average Target IRR
（%）

25
20

14.1
15

12.8
12.4

10

10.6

5
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 15/01(n=17)(n=35)(n=33)(n=32)(n=47)(n=61)(n=38)(n=26)(n=29)(n=33)(n=20)(n=26)(n=29)
Total
Fixed property type
Additional acquisition type
Discretionary investment type
Open‐ended funds

3) Debt FinanceRegarding debt financing, most of the asset managers selected either “4” or “5” from the choices (45 of 53
votes). The distribution of responses was roughly the same as in the previous survey (July 2014), and the debt
financing environment seems to remain favorable for the managers (Fig.11).
Fig.11 Circumstances of Debt Financing
17
17

5
improve

28

4

29
7
7

3
1

2

severe

0
0
0

1
0

5

10

15

Jan 15（Respondents 53）

20

25

July 14（Respondents 53）

4

30

35

News Release March 17, 20154) 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 “no change” increased. This suggests that a number of theasset managers that chose “no change” thought that investors’ appetite remained strong (Fig.12).
As to the property type, the equity investors seem to prefer the hotel sector best and the sector had the highest
percentage responding with “increase significantly” for both domestic and foreign investors. (Fig.13-1, Fig.13-2).
In the last survey (July 2014), the office had the highest percentage of the responses “increase significantly” and“increase” for both domestic and foreign investors. In this survey, however, the percentage remained high, 77%(88% in the previous survey), for overseas investors, but declined to 56% (83% in the previous survey) for
domestic investors. We consider that competition for acquiring offices and residential properties, the main
property types, is intensifying and therefore increasing numbers of investors are interested in hotels and facilities
for the elderly.

Fig.12 Appetite of Equity Investors
100%

1%

7%

80%

2%

10%

20%

5%

34%

41%

45%

60%

54%

19%

18%

75%

81%

82%

28%

57%

62%

83%

25%
40%
64%

61%
45%

40%

46%
54%

20%
13%

0%

08/07
(n=54)

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

60%
44%

31%

20%

Unchanged

Fig. 13‐1 Domestic Investors’ Appetite by Type of Target Property

5%

Residential（n=36）

3%

38%

09/07
10/01
10/07
11/01
11/07
12/01
12/07
13/01
13/07
14/01
14/07
15/01
(n=64) （n=55）（n=67）（n=61）（n=66）（n=58）（n=65）（n=50）（n=60）（n=54）（n=51）（n=53）
RisingOffice（n=37）

26%

20%

51%

Declining

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

43%

38%

57%

3%

Office（n=42）

10%

Residential（n=42）

8%

10%

Retail3%（n=38）

58%

39%

Retail（n=40）

Industrial（n=36）

53%

42%

Industrial
3%（n=40）

6%Hotel（n=36）

19%

50%

Facilities forthe elderly 3%（n=33）

0%

67%
20%

Increase significantly
Decrease

40%

72%

60%

Increase
Decrease significantly

28%

3%

Hotel
（n=41）

27%

3%

Facilities forthe elderly 3%（n=36）

80%

100%

Remain unchanged

5

67%

23%

49%

44%

65%

25%

59%

24%

0%
20%
Increase significantly
Decrease

38%

58%

55%
40%
60%
Increase
Decrease significantly

16%

3%

42%
80%
Remain unchanged100%News Release March 17, 2015

b. Sources of Overseas Capital (or Foreign Funds) by Country or Region
With respect to the capital sources from overseas at the asset managers who actually manage the overseas capitalof foreign investors, the share of North America has been on a downward trend since the January 2012 survey andfell below 20% (to 17%) for the first time. Europe has remained around 25% (Fig.14).
Fig. 14 Sources of Overseas Capital by Country or Region
100%
90%
80%

35%

33%

30%

23%

27%

31%

60%
40%

25%

25%

8%

10%

33%

30%

30%
20%

24%

21%

24%

24%

29%

21%

17%

22%

27%

10%

9%

12%

11%

22%

25%

7%
5%

8%
3%

North America
Europe

70%
50%

27%

10%

31%

24%

27%

11%

8%
6%

6%
7%

24%

25%

27%

6%

7%

7%

28%

3%

0%
08/07
(n=52)

09/01(n=40)

24%
10%
9%

10%

12%

10%

12%

8%

14%

17%

27%

8%
2%

2%
2%

24%
2%

Middle East

09/07 10/01 10/07 11/01 12/01 13/01 14/01 14/07 15/01(n=61) （n=49）（n=67）（n=70）（n=59）（n=49）（n=42）（n=58）（n=64）

China including Hong Kong
Asia including Australia
Asia (excl. China / M. East)
Australia
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.

c. Reasons for Foreign Investors Investing / Not Investing in Japan (Multiple answers allowed)
As for the reasons for investors investing in Japan, majority of the respondents chose “Relatively attractive dueto the yield gap”, “Allocation as part of the global portfolio”. These motives of foreign investors are assumed to
be a reason for the growing number of global funds investing in real estate in Japan (Fig.15).
The main reasons that foreign investors do NOT invest in real estate in Japan include country risks, such as“Lack of growth potential in GDP, consumption, population, etc.” and “Earthquake risk” (Fig.16).
Fig.15 Reasons for Foreign Investors Investing in Japann=148（Respondents31）

Relatively attractive due to the yield gap

26

Fig.16 Reasons for Foreign Investors Not Investingin the Japanese Real Estate Market

n=68（Respondents28）

Lack of growth potential in GDP, consumption,
population, etc.

19

21

Allocation as part of the global portfolio

Lack of attractive investment opportunities
The size of the real estate market is large

1319Highly stable income

Earthquake risk

14

Rental market is in a recovery phase

13

10

Low growth potential in income

9

Low transparency in the real estate market

912Politically and economically stable
Making investments in Japan, a mature market, while
expanding investments in Asia

10

Investment merits due to foreign exchanges are anticipated

10

Income with growth potential

6Highly transparent real estate market

5

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 future5

The effects of the European debt problem are relatively limited

2

More deal opportunities

2

Increase in investment opportunities due to undervalued realestate prices

Cannot embark on investment given uncertainty
in the rental market outlook

2

No end of the decline in real estate prices in sight2

Investment merits due to foreign exchange are
not anticipated1

Declining investment value due to a contractionin the yield gap

0Lack of policy consistency due to government
instability0

1
OthersOthers

3

2
0
0

5

10

15

20

25

6

30

5

10

15

20

News Release March 17, 2015

2. Status of the Investment Real Estate Market and Investment Strategies of Managers
1). Acquisition and Disposition of Properties in the July to December 2014
With respect to the number of the properties that companies had considered to acquire (ex. verification of
profitability), “10 properties or less” and “51 properties or more” rose from the previous survey (July 2014)(Fig.17). We think these responses reflect the fact that the asset managers focused on properties that were highly
likely to be profitable on one hand, and increasing number of the asset managers expanded their scope of theinvestment property under intensifying competition for acquiring properties and investigated more properties.
Fig. 17 Examined for acquisition16

10 properties or less

12
14

11～30 properties

15
831～50 properties

10
11

More than 51 properties

7
0

5

10

Jan 15（Respondents 49）

15

20

July 14（Respondents 44）

The result of a survey on the acquisition of properties in the July to December 2014 is as follows. More thanhalf of the respondents answered that they had acquired properties (Fig.18). The main reasons that the managers
did not acquire any properties were “Can’t agree on prices” and “Severe competition in bids” (Fig.19), whichsuggests that the environment for acquisitions of properties remained challenging. A survey on the disposition ofproperties from July to December 2014 reveals that over 60% of the asset managers sold properties (Fig.20).
Most of them who did not sell any properties chose “Did not plan to sell from the outset” as their reason (Fig.21).
The current real estate market seems to be favorable to sellers.
Fig.18 Circumstances for Acquisition

n=30（Respondents 21）

Fig.19 Reason for not acquiring property（Respondents 53）
Can't agree on prices

Didn'tacquire38%

17

Severe competition in bids

7

Did not plan to acquire from the outset

Acquired62%3

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

1

Others20Fig. 20 Circumstances for Disposition

5

10

15

20

n=20（Respondents 20）

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

18

Can’t agree on prices

Didn’t sellproperty
38%

Soldproperty62%

2

No inquiries despite sales activities

0

Continued to hold properties throughrefinancing, following favorable loan terms

0

Others

0
0

7

5

10

15

20

News Release March 17, 20152). Investment Strategies of the Asset Managers
a. Target Property Types (Multiple answers allowed)
With respect to the target property types, “office,” “retail,” and “residential” accounted for relatively large
percentages. The share of “office” and “residential” had been declining. We expect that the managers have been
expanding the scope of the investment properties due to the intensifying competition in acquiring offices andresidential properties (Fig.22).
b. Target Areas (Multiple answers allowed)
With respect to the target area, the aggregated share of “central 5 wards of Tokyo” and “23 wards of Tokyo(excluding central 5 wards),” fell to 41%. This happens for the first time for the ratio to become less than 50%
since December 2007 (Fig.23).
We believe that the asset managers are expanding their target areas into areas outside Tokyo, especially the
Kinki area and Nagoya area given the harder completion in central Tokyo.
Fig. 22 Target Property Types (Multiple answers allowed)
100%
90%
80%

13%

17%

10%

5%

14%

8%
11%

7%
10%

70%

15%

1%
4%

1%
4%

9%

11%

10%

15%
21%

22%

30%

29%

31%
27%

20%

1%
2%

1%
3%

9%

9%

9%
9%
10%

17%

16%

11%

19%
27%

13%

44%
30%

33%

15%

14%

13%

14%

23%

21%

19%
18%

33%

1%
2%
6%

20%

28%

30%
20%

1%
2%
8%

15%
23%

41%

40%

1%
1%
4%

18%
20%

26%

8%
13%

16%

8%

1%
6%

20%

60%
50%

11%

1%
4%

2%

1%

4%
4%

36%

40%

41%

36%

38%

33%

33%

10%

26%

17%

24%

15%

18%

23%

23%

0%
04/12
(n=46)

05/12(n=69)

Office06/12(n=61)

Residential

07/12(n=96)

09/01 09/07 10/01 10/07 11/01 11/07 12/01 13/01 14/01 14/07 15/01(n=87) (n=123) (n=119) (n=140) (n=138) (n=158) (n=160) (n=157) (n=162) (n=175) (n=174)

RetailIndustrial

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%

2%
8%

18%
11%

21%
25%

70%

6%

4%
3%
7%

10%

11%

2%
9%

4%

7%

5%
14%

11%

60%

40%

17%

29%

28%

29%

15%

3%
3%
9%

10%
14%

4%

5%

6%

8%

8%

9%

15%

15%

12%

23%

21%

28%
21%
25%

20%

46%

21%

04/12
(n=38)

50%

47%

11%
8%

0%

48%

33%

14%
10%

05/12
(n=51)

24%
19%

25%

5%

20%
20%

23%

25%
30%

7%
12%

19%
20%

30%
32%

32%

7%
5%

14%

18%
50%

3%
2%
6%

12%
24%

13%

2%
2%

1%
4%
3%
13%

40%

41%

43%
34%

26%

26%

22%

4%
06/12
(n=55)

07/12(n=98)

09/01 09/07 10/01 10/07 11/01 11/07 12/01 13/01 14/01 14/07 15/01(n=89) (n=107) (n=98) (n=131) (n=121) (n=148) (n=127) (n=122) (n=151) (n=157) (n=166)

Central 5 wards of Tokyo
Tokyo metropolitan area
Nagaya area
Nationwide

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.

8

News Release March 17, 2015

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).
Five companies chose “Preparing for a launch after consideration,” and we expect that private REITs will
increase on the back of equity investors’ strong investment appetite (Fig.25-1). As a reason of not establishingopen-ended private funds, the largest number of respondents chose “Concern over conflict of interest with otherfunds (including J-REITs)” (Fig.25-2).
Fig.24 Managers’ involvement with Open‐ended Private Funds
Seek to develop a better understanding and gather information, but notworking on a detailed study

20
10

Have heard of the name but not considered involvement
Decided not to launch after consideration but may consider again
in the future

8
6

Have already launched

Preparing for a launch after consideration

5

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

50Have neither heard of the name nor considered involvement0n=54（Respondents 52）

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).

8

No constraint on the sale of properties in terms of management periods

5

Stable compensation in the long term

5

Investors’ high interest in Open‐ended Private Funds

3

Favorable circumstances for equity raising

3

Being able to use a sponsor pipeline
Pumping investment money into the real estate market

2

There is some prospect for including certain properties2

Low debt financing cost

0

Lower level of disclosure required than for J‐REITs

0

Having expertise in the establishment and management of funds

0

Others00n=28（Respondents 11）

2

4

6

8

10

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

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

4

Decided that constant equity raising is difficult

4

Focusing on the management of closed‐end funds

3

Investors being limited to qualified institutional investors

3

Decided that now is not the right time due to current business sentiment2

Decided that acquiring properties constantly is difficult1

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

1

Huge costs for establishment and initial operation
Not emphasizing income in management

0

Concern over conflict of interest with sponsors

00Others0n=23（Respondents 13）

9

2

4

6

News Release March 17, 20152) Closed-ended fund in the future
As an investment management scheme that is expected to be used by more asset managers, the largest numberof respondents chose “GK-TK scheme” because of less effort and cost needed for setting up and managing funds(Fig.26-27). We have confirmed the needs also for “TMK scheme.” Relatively large numbers of the asset
managers, who chose “TMK scheme” for their preferred scheme, quoted foreign investors as their target equity
investors (Fig.28).
n=57（Respondents49）

Fig. 26 Investment Management Schemes Expected to Be Used More (multiple answers allowed)

GK‐TK scheme

32

TMK scheme

16

Investment scheme under Real Estate Specified Joint Enterprise Act(bankruptcy remoteness scheme)

8

Others

1

0

5

10

Fig. 27 Reason for Choosing the Scheme (multiple answers allowed)
Low cost for setting up

2

Tax advantages

2

n=115
13

6

10
22

12

Relatively small effort for setting up and managing

12

Has become easier to use following legal change
Long‐term investment is possible

1

Not subject to Building Lots and Buildings Transaction Business
Act

1

15

3

Meeting investors’ needs (scope of investors that can invest)

10

1

0

2

Domestic major bank2

Domestic regional bank

2 3

Other domestic institutional investor

2 3

15

20

25

16
16

1
1
0

9
9

3

Others

10

13
10

7

2

Fund of funds

5

13

5
4

2

Sovereign Wealth Fund (SWF)

6

13

3 4
4

1

Overseas wealthy class1
1

Others2

Overseas institutional investor (other than SWF and pension fund)

14

5
5
3

35

4

Domestic corporate pension fundDomestic affiliated financial institution

Overseas pension fund1

Suitable for target properties

30

n=197

Domestic wealthy class1

Actual stuff can be acquired (no need for trust beneficiary rights)

25

Domestic nonfinancial firm

1

Issuing bonds is possible

20

Fig. 28 Target Equity Investor

5

2
2 3

5

11

7

4

7

10

15

20

GK‐TK scheme

GK‐TK scheme

TMK scheme

TMK scheme

Investment scheme under Real Estate Specified Joint Enterprise Act (bankruptcy remoteness scheme)

Investment scheme under Real Estate Specified Joint Enterprise Act (bankruptcy remoteness scheme)

OthersOthers10

News Release March 17, 20153) Manager’s Requirements for Future Growth and Sustainability of their Businesses (Multiple answers allowed)
Among requirements for sustainability and growth of the asset managers, the largest number of the managers
chose “Strengthen property-acquisition capability.” More asset managers picked up “Enhancement of equity raisingcapabilities” compared with the previous survey (July 2014) (Fig.29).
We consider given the continued challenging market condition for acquisitions of properties, more asset
managers put priority on setting up funds that meet the needs of the equity investors.

Fig. 29 Requirements for Sustainability and Growth of Managers (choosing up to three options)
38

Strengthen property‐acquisition capability
23

Enhancement of AM capabilities
19

Enhancement of equity raising capabilities

18

Management strategy and its explanatory ability
13

Enhancement of relations with investors
8

Enhancing the ability to handle foreign investors

8

Entry into open‐ended funds business
7

Enhancement of research capabilities
6

Competence in special expertise6

Reinforcement of compliance structure
5

Expansion of foreign real estate fund management business
4

Sufficient of information disclosure
2

Enhancement of debt financing capabilities
Corporate strength (financial health, scale of operations)1

Capabilities for NPL investment activity

11Expansion of target property types
0

Strengthening of earthquake/disaster response capability

1

Others0
Jan 15（n=161 Respondents 55）

5

10

July 14（n=162 Respondents 53）

11

15

20

25

30

Jan 14（n=153 Respondents 49）

35

40

News Release March 17, 2015

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 asset managers. In this report, commingled funds that are designed for multiple
investors, and separate accounts, investment programs for single investors are both categorized
as private real estate funds. This does not include products governed by the Act Concerning
Designated Real Estate Joint Enterprises. Commissioned AM means only the acceptance of
only asset management commissioned by funds set up by other companies, without engaging infund 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 REIT.
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 March 17, 2015

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https://www.smtri.jp/en/contact/index.html
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13