NEWS RELEASE
Survey on Private Real Estate Funds in Japan
July 2015– Results
September 4, 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 the20th survey based on responses to questionnaires received from 58 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: 106

The number of responses: 58 (ratio of valid responses: 54.7%)Survey period: July 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 June 2015 to be 15.1 trillion yen. This
figure involves Japanese assets of global funds (*) that we were aware of. Although the market size
decreased approximately 50.5 billion yen (0.3%) from the previous January 2015 survey (15.1 trillion yen),
it has remained almost unchanged.
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 June 2015 were 15.1 trillion yen. Although the market size
decreased approximately 50.5 billion yen (0.3%) from the last survey, it has remained almost unchanged.
・The number of asset managers whose assets under management increased exceeded the number of asset
managers whose assets under management decreased. Meanwhile, there were some asset managers for whichassets under management decreased significantly due to factors such as the termination of funds. Overall,assets under management remained mostly flat, and the AUM of domestic private real estate funds and global
private funds each remained almost unchanged from the previous survey.
・In contrast to J-REIT which has been continually expanding the market size, that of private real estate funds
had been shrinking mainly due to selling part of the property holdings since the survey at the end of December
2012. In this survey, the market size remains mostly flat compared to the previous survey. It appears that the
downward trend in the market may have been stemmed. Although acquiring properties in the real estate trading
market remains difficult, a number of asset managers are planning to set up their funds within a year, andalmost all managers show their active attitude in terms of acquiring properties. The market of private realestate funds is expected to expand again and grow healthy.
(*) We define “global fund” as a fund targeting real estate investments in various countries including Japan.

1News Release September 4, 2015
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

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
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)“ Survey on private real estate funds”

July 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) Management of Overseas Capital
In response to the question as to whether they manage overseas capital, 69% of the respondents chose “Yes” (Fig.1).
The percentage of respondents who chose “Yes” was the highest since the July 2008 survey, which indicates that theinterest of foreign investors has increased.
Fig.1 Do yo manage overseas capital?
100%
80%

46%

51%

51%

53%

47%

47%

45%

45%

54%

49%

49%

47%

53%

53%

55%

55%

37%

40%

42%

40%

44%

38%

31%

63%

60%

58%

60%

56%

62%

69%

60%
40%
20%
0%
08/07 09/01（n=54) (n=47)

09/07 10/01 10/07 11/01 11/07 12/01 12/07 13/01 13/07 14/01 14/07 15/01 15/07(n=63) （n=53）（n=60）（n=57）（n=62）（n=64）（n=62）（n=50）（n=60）（n=55）（n=52）（n=52） (n=55)

Yes

No

2) 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 property type,” by fund type and “Core” bymanagement style continued to have a majority (Fig.2 and Fig.3), however “Open-ended funds” by fund typeaccounted for 12%, the largest share ever.
By target property type, the ratio of “Office” and “Retail” slightly increased, on the other hand, that of “Industrial”
slightly decreased from the previous survey. (Fig.4) The breakdown of target properties by area remained almost
unchanged from the previous survey. “23 wards of Tokyo” accounted for the largest percentage, and the percentage of“Tokyo metropolitan area” and “Kinki area” were close to that of “23 wards of Tokyo” (Fig.5) Taken together, theseresults indicate that investors’ needs for low-risk stable management funds, such as “Fixed property type” and “Core”
remain strong. In addition, because acquiring properties remain difficult, a trend has emerged of diversifying target
property types and areas of target properties.

2

News Release September 4, 2015

Fig. 2 Fund types

Fig. 3 Management Style

100%
11%

90%

12%

20%

23%

2%
20%

8%

17%
32%

80%
70%

41%

32%
28%

60%

25%

5%

8%

5%

30%

23%

18%

22%

6%

11%

100%
12%

90%
80%

21%

37%

28%

36%

2%

8%

70%

11%

60%

12%

16%
3%

50%

18%
12%

13%
13%

9%

10%

12%

12%

24%

24%

3%
11%

5%
26%

2%

2%

25%

21%

23%
11%

12%

10%

9%

17%

15%

18%

14%
11%

24%

13%

16%

17%

29%

4%
10%
16%
18%

50%
40%

40%
30%
48%

20%

56%

52%

56%

56%

41%

63%
51%

50%

61%

67%

62%

62%

30%

54%

20%

55%

45%

54%

63%

64%

58%

63%

55%

45%

57%

51%

10%

10%

0%

0%

05/12 06/12 07/12 09/01 10/01 11/01 12/01 13/01 14/01 14/07 15/01 15/07(n=49) (n=45) (n=106) (n=78) (n=88) (n=65) (n=56) (n=58) (n=42) (n=40) (n=54) (n=57)

04/12 05/12 06/12 07/12 09/01 10/01 11/01 12/01 13/01 14/01 14/07 15/01 15/07(n=44) (n=50) (n=44) (n=85) (n=61) (n=72) (n=62) (n=59) (n=54) (n=44) (n=39) (n=55) (n=57)
Fixed property type

Additional acquisition type

Discretionary investment type

90%
80%

9%

17%

19%

19%
12%

70%

7%

10%

12%

23%

22%

18%

43%

36%

36%

40%

3%
9%
13%
20%

26%

25%

12%
12%

1%
2%
10%

1%
11%
15%

11%

20%

18%

10%

3%
4%
11%
22%

18%

18%
25%

25%

25%

25%

23%

30%
20%

29%

33%

29%

Opportunity

Development

Debt

Fig. 5 Target Areas
1%
9%

60%
50%

Value‐added

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

Fig. 4 Target Property Types
100%

Core

Open‐ended funds

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

30%

34%

31%

30%

31%

28%

20%

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

24%

1%
4%
11%
23%

22%
17%
20%

2%
2%
9%

100%
90%
80%

19%

70%
60%

25%

18%
31%

28%

16%
16%

3%

2%

1%

17%

17%

20%

18%

12%

11%

14%

17%
22%

15%

27%
19%

50%

24%

40%

18%

30%
20%

25%

49%

10%

0%

32%

14%

0%

04/12 05/12 06/12 07/12 09/01 10/01 11/01 12/01 13/01 14/01 14/07 15/01 15/07(n=69) (n=81) (n=77) (n=164)(n=111)(n=122)(n=151)(n=123)(n=110) (n=74) (n=70) (n=98) (n=118)
OfficeResidential
RetailIndustrial
Hotel
Facilities for the elderly
Health‐care facilities
Others

16%

20%

27%

2%

4%

16%
22%

15%
14%
22%

20%

7%

4%

14%

19%

4%
10%
13%

12%
14%

15%

2%

2%

15%

16%

15%

15%

20%

21%

23%

23%

24%

24%

17%
17%
20%

19%
20%

37%
24%

31%

25%

26%

27%

33%

25%

36%

8%

04/12 05/12 06/12 07/12 09/01 10/01 11/01 12/01 13/01 14/01 14/07 15/01 15/07(n=91) (n=99) (n=83) (n=231)(n=155)(n=189)(n=169)(n=157) (n=105) (n=75) (n=70) (n=104)(n=153)
23 wards of Tokyo・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.

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 7.3 years and the targeted investment
period of the funds scheduled to be launched within a year was 6.4 years, each of them got shorter than the previous
survey. (Fig.6) Regarding the range of investment period of the funds currently under management, the share of “Atleast five years but less than seven years” rose to 51% from 29% in the previous survey, however the share of “Tenyears or more” fell to 23% from 32%. The aggregated share of “Less than five years” accounted only 8%, it showsthat middle and long term funds accounted for the most in the market. (Fig.7)
Fig. 7 Breakdown of Average Target Investment Period

Fig. 6 Average Target Investment Period（Years）

100%

9
8
7

7.3
6.7
6.4

6.0

6
5

5.3
4.7

4.4

4.3

5.3

6.1

4.6
4.8

4
3

90%

7.7

5.3

6.5

6.4

5.2

5.9

70%
6.4

5.9

3.5

10%

1

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 15/07
Funds currently under management

Funds scheduled to be launched within a year

3

3%
19%

7%

4%
17%

10%

10%

23%

29%

32%
46%

27%

43%

20%

29%
47%

34%

29%

32%

32%

36%

14%

19%
6%

48%

59%
10%

11%
4%

51%
29%

23%

35%
15%

23%

18%

44%
46%

12%

5%
22%

31%

37%

20%

2

3%
14%

34%

40%
30%

5%
3%

47%

50%

5.0

4.2

3.8

60%

2%
7%
19%

80%

6.9

6.1

12%

17%
4%

10%

3%
10%

8%
3%

5%
3%

04/12 05/12 06/12 07/12 09/01 10/01 11/01 12/01 13/01 14/01 14/07 15/01 15/07(n=34) (n=43) (n=39) (n=76) (n=63) (n=64) (n=56) (n=47) (n=54) (n=30) (n=31) (n=38) (n=39)
Less than three years
At least three years but less than five years
At least five years but less than seven years
At least seven years but less than ten years
Ten years or moreNews Release September 4, 2015

With respect to the average LTV level of the funds currently under management was moderate decreasing and thatof the funds scheduled to be launched within a year was generally rising since the January 2009 survey. In this survey,
the average LTV level of the funds currently under management was 64.9%, that of the funds scheduled to belaunched within a year was 65.3%, there is not much difference between them. (Fig.8)
Regarding the range of the LTV level of the funds currently under management, the largest share of respondents
chose “At least 60% but less than 70%”, and the share of “ 80% or more”, so-called highly leveraged funds, has been
increasing (Fig.9). Meanwhile, the share of “At least 40% but less than 50%” including many answers of open-ended
funds increased, the average LTV level slightly decreased from the previous survey as a result. Also, regarding therange of the LTV level of the funds scheduled to be launched within a year, the share of “80% or more” accounted for
only 5%. (Fig.11) Considering these findings, we assume that although the environment continues to allow for debt
financing to be made on favorable terms, it is unlikely that highly leveraged funds will be the mainstream as they werefrom 2005 to 2007. As for closed-ended funds, funds whose LTV level is from 60% to 70% will continue to be themainstream.
With respect to the average target IRR of the funds currently under management, the average target IRR of all
funds remained unchanged, there were discretionary funds aiming for high returns. The average target IRR for
discretionary funds was 20.9% (Fig.10).
Fig. 9 Range of LTV level (Funds currently under management)

Fig. 8 Average LTV Ratio
75

100%

（％）
72.1

70.7

72.3

70.9

90%

71.3

70

67.4
71.0

65

67.6

66.2

66.8

66.0

68.6
63.5

15%

10%

3%
16%

63.8

64.4

70%
65.3

60%

64.9

43%

67%
62%

66%

20%

59.4

55

32%
21%

10%
0%
06/12

07/12

09/01

10/01

Funds currently under management

11/01

12/01

13/01

14/01

14/07

15/01

15/07

Funds scheduled to be launched within a year

（％）

100%
90%

20.9

3%
3%

21%
3%

28%

10

19%

11%

3%

7%
38%

80%

13.7

60%

11.8

50%

10.8

40%

8.0

30%

5

7%
2%

13%

9%

8%

17%

10%
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 15/07(n=17) (n=35) (n=33) (n=32) (n=47) (n=61) (n=38) (n=26) (n=29) (n=33) (n=20) (n=26) (n=29) (n=34)
Fixed property type

Discretionary investment type

Open‐ended funds

28%

30%

31%

18%

14%
3%

44%

23%

29%

21%

14%

3%

14%
0%

28%
31%
20%

11%
4%

4%
4%

30%

9%
9%
3% 12%
9%
5%

78%

43%

50%

38%

5%
33%

25%
5%
10%

11%

4%

5%

5%
32%
36%

45%

25%
21%
4%

4%
4%

30%

36%

36%
22%

6%

45%

33%

45%

05/12 06/12 07/12 09/01(n=21) (n=18) (n=28) (n=26)
Less than 40%
At least 60% but less than 70%

Additional acquisition type

19%
26%

46%
67%

9%
23%

61%

20%

0

Total

26%

20%

59%

22%
10%
7%

70%
15

16%

Fig. 11 Range of LTV level (Funds scheduled to be launched within a year)

Fig.10 Average Target IRR(Funds currently under management)

20

15%

04/12 05/12 06/12 07/12 09/01 10/01 11/01 12/01 13/01 14/01 14/07 15/01 15/07(n=38) (n=33) (n=39) (n=72) (n=61) (n=51) (n=51) (n=48) (n=53) (n=37) (n=36) (n=47) (n=61)
Less than 40%
At least 40% but less than 50%
At least 50% but less than 60%
At least 60% but less than 70%
At least 70% but less than 80%
80% or more

50
05/12

8%

45%

48%

30%
57.6

11%

60%

40%

60
60.2

7%

22%
48%

50%

66.4

64.9

25

6%

80%

68.9

70.2

16%

29%

9%
5%

18%

18%

5%

5%

10/01 11/01 12/01 13/01 14/01 14/07 15/01 15/07(n=24) (n=35) (n=47) (n=44) (n=31) (n=34) (n=30) (n=29)
At least 40% but less than 50%
At least 50% but less than 60%
At least 70% but less than 80%
80% or more

※In our questions, we distinguish the loan-to-total assets ratio and the loan-to-acquisition value ratio. The average LTV level iscalculated based on the loan-to-acquisition value ratio.

4

News Release September 4, 2015

3) Debt FinanceRegarding debt financing, while the share of “5 (Very easy)” slightly declined, the aggregated share of “4(Easy)”and “5” accounted for more than 80%. Looking at surveys conducted in the past, 33% of the respondents chose“Difficult” in the July 2010 survey, but the debt financing environment improved remarkably in the following two
years. Since the July 2012 survey, excluding the July 2013 survey, more than 80% of the managers responded either“4” or “5”, the debt financing environment seems to remain favorable for the managers (Fig.12).
Fig.12 Circumstances of Debt Financing
100%

10%

2%

4%

6%

19%

63%

56%

60%

19%
33%

31%

80%

32%

55%

53%

13%

13%
2%

25%

48%
53%

20%

32%

60%
67%

40%

25%

57%
60%

33%

30%

29%

3%

5%

13%
0%

32%
11%
3%

8%

17%
2%

59%

14%
2%

10/07 11/01 11/07 12/01 12/07 13/01 13/07 14/01 14/07 15/01 15/07(n=63) (n=62) (n=67) (n=62) (n=63) (n=52) (n=62) (n=53) (n=53) (n=53) (n=56)1（Very difficult）

2（Difficult）

3（Neutral）

4（Easy）

5（Very easy）

4) Equity Raisinga. Appetite of Equity Investors
With respect to the appetite of equity investors, no respondents answered “Declining”, while the share of responsesof “No change” rose to 61% from 28% in the previous survey. (Fig.13) However, it can be inferred that many asset
managers who chose “No change” thought that investors’ appetite remained strong.
As to the property type, the hotel sector had the highest percentage responding with “Increase significantly” and“Increase” for both domestic and foreign investors. The total share of “Increase significantly” and “Increase”
accounted for 81% for domestic investors, 75% for foreign investors. This indicates that given an increase in thenumber of inbound tourists and the 2020 Tokyo Olympics, the appetite of both domestic and foreign investors rose.
(Fig.14-1, Fig.14-2). Meanwhile, in the previous survey, a total of 70% of the domestic investors chose “Increasesignificantly” or “Increase” for elderly facilities. In this survey, the percentage fell to 50%. The share of responses of“No change” increased from the previous survey in all property types excluding the hotel sector for both domestic andforeign investors, as mentioned above, not showing the decline of the appetite of investors but suggesting that many
managers who chose “no change” thought that investors’ appetite remained strong.
Fig.13 Appetite of Equity Investors
100%
18%

80%

1%

45%

5%
25%

54%

61%

57%

45%

20%
9%
07/12
(n=37)

28%

64%
75%

46%

06/12
(n=34)

18%

61%

74%

24%

19%

40%

62%

83%

59%

10%

34%

54%

0%

2%
20%

41%

60%
40%

7%

16%

31%

81%

82%

72%

60%
44%

38%

39%

26%

13%

15%
2%

20%

08/07
(n=54)

09/01(n=48)

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

Rising20%

No change

Declining5News Release September 4, 2015
Fig. 14‐1 Domestic Investors’ Appetite by Type of Target Property
Office(n=44) 2%

Industrial(n=38)
Hotel(n=42)
Facilities forthe elderly(n=36)

44%

44%

6%
0%
20%
Increase significantly
Decrease

3%
2%

Hotel
(n=43)

6%

Facilities forthe elderly(n=33)

17%

64%

17%

40%
60%
Increase
Decrease significantly

80%
Remain unchanged

45%

2%

55%
49%

42%

39%

56%

19%

3%

56%

23%

39%
0%

100%

43%

43%

9%

Industrial(n=36) 3%

55%

34%

8%

Retail(n=43)

52%

45%

10%

Residential(n=42) 2%

2%

60%

37%

Retail(n=42) 2%

Office(n=42)

48%

50%

Residential(n=43)

Fig. 14‐2 Foreign Investors’ Appetite by Type of Target Property

20%

Increase significantly
Decrease

58%
40%

60%

Increase
Decrease significantly

2%
3%

80%

100%

Remain unchanged

b. Sources of Overseas Capital (or Foreign Funds) by Country or Region
With respect to the capital sources from overseas, the highest response rate was for investors from “Asia (excl.
China /M.East)”at 28%, followed by “Europe”. The share of “Europe” tends to exceed that of “North America”
since the January 2014 survey. (Fig.15).
Fig. 15 Sources of Overseas Capital by Country or Region
100%
90%
80%

35%

33%

30%

31%

27%

24%

60%

40%

25%
8%

25%

10%

30%
20%

33%

30%

10%
3%

0%

31%

11%

28%

24%
8%
6%

27%

24%

21%

21%

17%

19%
North America

70%

50%

23%

27%
6%
7%

24%

25%

6%

7%

10%

24%

7%

29%

10%

12%

10%

12%

8%

14%

9%

27%

24%

17%

27%

8%
2%

2%
2%

27%

26%

10%

9%

9%

China including Hong Kong

12%

11%

11%

Asia including Australia

22%

25%

7%
5%

8%
3%

Middle East

Asia (excl. China / M. East)

28%

24%
2%

Europe22%

Australia
Others5%
2%

08/07 09/01 09/07 10/01 10/07 11/01 12/01 13/01 14/01 14/07 15/01 15/07(n=52) (n=40) (n=61) (n=49) (n=67) (n=70) (n=59) (n=49) (n=42) (n=58) (n=64) (n=57)
・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 due tothe yield gap”, “The size of the real estate market is large”,” Highly stable income” and “Allocation as part of the
global portfolio”. (Fig.16). These choices have been the major reasons indicated in every survey in the past, andhave been established as the reasons for foreign investors investing in Japan. Meanwhile, in this survey, the number
and percentage of “Expected positive effects of exchange rates” rose from the previous survey (10 respondents, 7%→16 respondents,11%). This indicates that the continuation of the weaker yen was an incentive for foreign investors
to invest in the real estate market in Japan.
As the reasons for not investing in Japan, majority of the respondents chose “Lack of growth potential in GDP,
consumption, population, etc.”, “Lack of attractive investment opportunities” and “Rising in real estate prices”(Fig.17).

6

News Release September 4, 2015
n=143（Respondents36）

Fig.16 Reasons for Foreign Investors Investing in Japan (Multiple answers allowed)
Relatively attractive due to the yield gap

22

The size of the real estate market is large

18

Highly stable income

17

Allocation as part of the global portfolio

17

Expected positive effects of exchange rates

16

Politically and economically stable

15

Rental market is in a recovery phase

10

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

9

Making investments in Japan as part of investment strategies in Asia, while
avoiding other cities where there are risks of a fall in prices in the future5

Income with growth potential

4Highly transparent real estate market

3

Increase in investment opportunities due to undervalued real estate prices

3

The effects of the European debt problem are relatively limited

1

More deal opportunities

0

Others

3

0

5

10

15

Fig.17 Reasons for Foreign Investors Not Investingin the Japanese Real Estate Market (Multiple answers allowed)

20

25

n=89（Respondents33）

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

21Lack of attractive investment opportunities

14

Rising in real estate prices

13

Earthquake risk

11

Low growth potential in income

8

Low transparency in the real estate market

7

Decrease in the supply of investable real estate

5

Investment merits due to foreign exchange are not anticipated3

Lack of attractiveness to the yield gap

2Large risk of the decline in real estate prices

2

Cannot embark on investment given uncertainty in the rental
market outlook

1

Lack of policy consistency due to government instability

1

Others

1

0

5

7

10

15

20

25

News Release September 4, 2015

d. Acquisition and Disposition of Properties in the January to June 2015
As to a survey on the acquisition of properties in the January to June 2015, 71% of the respondents answered thatthey had acquired properties. The share of respondents who answered they had acquired properties has been
increased since the January 2014 survey. (Fig.18). The main reasons that the managers did not acquire any
properties were “Can’t agree on prices” and “Severe competition in bids” , the total share of those reason accounted
for 83% (Fig.19), which suggests that the environment for acquisitions of properties remained challenging.
A survey on the disposition of properties in the January to June 2015 reveals that 64% of the managers soldproperties (Fig.20). Most of them who did not sell any properties chose “Did not plan to sell from the outset” astheir reason, while the share of “Can’t agree on prices” accounted for only 5%. (Fig.21). The current real estatemarket seems to be favorable to sellers.
Fig.18 Circumstances for Acquisition

Fig.19 Reason for not acquiring property

100%

100%

80%

49%

51%

42%

29%

38%

44%

60%

60%

40%
20%

51%

49%

58%

71%

62%

56%

13/01
13/07
14/01
14/07
15/01
（n=49） （n=61） （n=52） （n=54） （n=53)

15/07(n=55)

55%

57%

50%
Severe competition in bids

80%

0%

24%
4%
4%
11%

16%
3%
5%

20%
13%
3%
7%

32%

23%

33%

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

10%
3%
7%

6%
6%
6%

Others10%3%

13/01 13/07 14/01 14/07 15/01 15/07（n=45) （n=37) （n=30) （n=31) （n=30) (n=18)

Fig. 21 Reason for not Selling Property

100%

100%
30%

40%

29%

36%

38%

90%
Did not plan to sell from the outset

80%
70%

60%
40%

57%

Did not plan to acquire from the outset

Didn't acquireFig. 20 Circumstances for Disposition

80%

51%

40%
20%

0%

Acquired

Can't agree on prices

80%

60%

86%

50%
70%

60%

71%

64%

62%

20%
10%

0%
13/07
14/01
14/07
15/01
（n=60） （n=50） （n=52） （n=52）
Sold property

15/07(n=56)

Didn’t sell property

100%

90%

95%

Can’t agree on prices

40%
30%

20%

No inquiries despite sales activities

71%

Continued to hold properties throughrefinancing, following favorable loan terms

6%
24%

0%

5%
9%

10%

Others

5%

13/07
14/01
14/07
15/01
15/07
（n=17） （n=22） （n=12） （n=20） (n=20)8News Release September 4, 2015

2. Plans and Investment Strategies of Asset Managers
1). Plans of Launch of New Funds and Acquisition /Disposition of Properties within a year
Regarding the funds scheduled to be launched within a year, 81% of respondents answered that they “Plan tolaunch”. almost 80% of managers responded that they had planned to launch new funds within a year since theJanuary 2014 survey.(Fig.22)
As to plans of acquiring properties within a year, the share of respondents that they plan to acquire properties has
been increased since the July 2014 survey, it accounted for 98% in this survey.(Fig.23). On the other hand, the shareof respondents that they plan to sell properties within a year accounted for 63%.(Fig.24) . Although the supply ofinvestment-grade properties was low throughout the entire market, most of the asset managers exhibited a positive
attitude for acquisition of properties. The market is thus expected to be favorable for sellers for some time to come.
Fig.23 Plans of acquiring properties

Fig.22 Plans of Launch of New Funds
100%
16%

20%

80%

28%

19%

100%

9%

17%

80%

72%

81%

20%

91%

83%

40%

14/07
(n=51)

Plan to launch

15/01(n=53)

20%

56%

59%

63%

14/07
(n=50)

15/01(n=54)

15/07(n=54)

0%
14/07(n=52)

15/07(n=52)

No plan to launch

41%

40%

0%
14/01
(n=51)

37%

44%

98%

20%

0%

100%

60%

60%
84%

Fig.24 Plans of selling properties

80%

80%

60%
40%

2%

15/01
(n=54)

Plan to acquire

15/07(n=54)

No plan to acquire

Plan to sell

No plan to sell

2). Investment Strategies of Asset Managers
a. Target Property Types (Multiple answers allowed)
In terms of the target property types, “Office” was chosen by the largest percentage of the respondents, followedby “Retail” and “Hotel”(Fig.25) It is inferred that the numbers of managers who focus on the hotel sector havebeen increasing due to rising appetite of both domestic and foreign investors for the sector.
b. Target Areas (Multiple answers allowed)
In terms of the target area, the aggregated share of “Central 5 wards of Tokyo” and “23 wards of Tokyo (excluding
central 5 wards)” slightly increased from the previous survey. The share of “Kinki area” accounted for 19%, thesame as the previous survey, almost same as that of “Tokyo metropolitan area (20%)” (Fig.26) Because it remains
difficult to acquire good properties, especially in central Tokyo, target properties have been dispersed to different
areas. In recent surveys, the Kinki area and the Nagoya area appear to have been established as priority areas.

9News Release September 4, 2015
Fig. 25 Target Property Types (Multiple answers allowed)
100%
90%
80%

4%
4%
17%

70%

13%
10%
20%

60%
50%

11%

14%

7%
10%

15%

20%

22%

5%
11%
8%

30%

41%

4%
11%

16%
21%

4%
9%
15%

20%

6%
10%

8%
13%

17%

1%
4%
9%
10%

2%
9%

29%

27%

20%

33%

30%

33%

36%

40%

36%

38%

33%

14%

18%

13%

14%

19%

23%

21%

19%

17%

15%

18%

17%

24%

23%

23%

23%

13%

19%
18%

41%

15%

11%

30%
44%

3%
6%

16%

20%

28%

13%

2%
6%

9%

23%
31%

2%
8%

3%
9%

15%

18%

27%
26%

40%

4%
8%

33%

10%

26%

0%
04/12 05/12 06/12 07/12 09/01 09/07 10/01 10/07 11/01 11/07 12/01 13/01 14/01 14/07 15/01 15/07(n=46) (n=69) (n=61) (n=96) (n=87) (n=123) (n=119) (n=140) (n=138) (n=158) (n=160) (n=157) (n=162) (n=175) (n=174) (n=185)

OfficeResidential

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. 26 Target Areas (Multiple answers allowed)
100%

8%

90%
80%

21%

2%
8%

10%
0%

7%
6%

4%
3%
7%

10%

11%

4%
3%
13%

2%
5%
14%

3%
2%
6%
17%

12%
11%

18%
15%
32%

7%
5%

3%
3%
9%

10%
14%

4%
8%

5%
8%

6%
9%

12%

15%

15%

14%
29%

28%

29%

30%
32%

23%

28%

21%

8%

21%

20%

5%
11%
19%

20%

21%
25%

24%
19%

46%

48%

50%

47%

33%

14%

12%

20%

23%

25%

5%

7%

19%
20%

25%

30%
20%

4%
24%

13%

50%
40%

9%
11%

25%

70%
60%

18%

40%

41%

43%

34%

11%
4%

26%

26%

22%

21%

24%

04/12 05/12 06/12 07/12 09/01 09/07 10/01 10/07 11/01 11/07 12/01 13/01 14/01 14/07 15/01 15/07(n=38) (n=51) (n=55) (n=98) (n=89) (n=107) (n=98) (n=131) (n=121) (n=148) (n=127) (n=122) (n=151) (n=157) (n=166) (n=183)

Central 5 wards of Tokyo
Kinki area
Nationwide

23 wards of Tokyo (excluding Central 5 wards)
Nagoya area
OthersTokyo metropolitan area
Local cities

・"Nagoya area” was included in “Local cities” or “Others” until the December 2006 survey.

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 managers, the largest number of
respondents, chose “Seek to develop a better understanding and gather information, but not working on a detailed
study”. On the other hand, 10 managers answered that they “Have already launched”, and 4 managers chose“Preparing for a launch after consideration,” we expect that private REITs will increase on the back of equity
investors’ strong investment appetite (Fig.27).
In terms of important factors for development in the private REITs market in the future, the largest numbers, 24
managers chose “Expansion of the numbers of private REITs and the asset size” and “Enhancement of the trackrecord”, followed by “Expansion of the number of investors to invest in funds,” and “Improvement in liquidity(Increase in frequency, easing on refund restrictions)”(22 respondents each) (Fig.28).
Many asset managers believe that in order to develop the private REITs market, they need to increase liquidity inaddition to expanding their asset size and enhancing their track record.

10News Release September 4, 2015

Fig.27 Managers’ involvement with private REITs

n=55（Respondents 54）

Seek to develop a better understanding and gather information,
but not working on a detailed study

20

Have already launched

10

Have heard of the name but not considered involvement

9

Decided not to launch after consideration but may consider again

8Preparing for a launch after consideration

4

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

2

Have neither heard of the name nor considered involvement

2
0

5

10

15

Fig.28 Important Factors for Development in the private REITs Market

20

25

n=126（Respondents48）

Expansion of the number of private REITs and the asset size

24

Enhancement of the track record

24

Expansion of the categories of investors to invest in funds

22

Improvement in liquidity (increase in frequency, easing of refund
restrictions, etc.)22

Support of the sponsor

11Standardization of items to be disclosed

8

Increase in visibility among investors

6

Review of laws and financial accouting systems

2

Improvement in frequency of disclosure

2

Enhancement of compliance1

Reduction of minimum investment unit

1

Others

3

0

5

10

15

20

25

30

2) Closed-ended fund in the future
In regards to the future trends of assets under management of closed-ended funds, the total share of “Increase” and“Slightly increase” accounted for 63% , exceeded that of “Decrease” and “Slightly decrease”(Fig.29)
As for the reasons responding “Increase” or “Slightly increase”, the majority of managers chose “Increase offoreign investors’ money” (23 respondents) and “Increase of domestic investors’ money” (20 respondents) , itshowed that many managers expected growth in the closed-ended fund market due to increasing of both foreign anddomestic investors’ money.(Fig.30) Meanwhile, as for reasons responding “Decrease” or “Slightly decrease”, thelargest numbers of respondents chose “Limited supply of existing investment-grade real estate” (8 respondents).
(Fig.31), a certain number of asset managers believe that the short supply will lead to a reduction in market size.
“Rise in real estate prices” was chosen as a reason for both an increase and a decrease, which shows that asset
managers have different views on how a rise in real estate prices affects the market.

11News Release September 4, 2015

Fig.29 Assets under management of closed‐ended funds
Decrease4%

Slightly
decrease
33%

Increase21%

Slightly
increase
42%（Respondents52）

Fig.30 Reasons for Increase of assets under management(Multiple answers allowed)

n=79（Respondents33）

Increase of foreign investors’ money

23

Increase of domestic investors’ money

20

Expansion of the scope (area, type, etc.) of lenders’ consideration of lending

11

Rise in real estate prices

10

Easing of lending terms

6

Increase in development projects

5

Increase in supply of existing investment‐grade real estate

1

Limited supply of existing investment‐grade real estate

1

Limited supply of development projects

1

Others

1

0

5

10

15

20

Fig.31 Reasons for Decrease of assets under management(Multiple answers allowed)

25

n=31（Respondents19）

Limited supply of existing investment‐grade real estate

8

Rise in real estate prices

6

Decline in real estate prices

3

Decrease of domestic investors’ money2

Decrease of foreign investors’ money2

Decrease in development projects

2

Decrease of the scope (area, type, etc.) of lenders’ consideration of lending

1

Tightening of lending terms

1

Others

6

0

2

12

4

6

8

10

News Release September 4, 2015

3) Fund Managers’ Involvement in the Overseas Real Estate Management BusinessWith respect to fund managers’ involvement in the overseas real estate management business, 27 respondents, thelargest number of the managers chose “No plans now or in the future”. Meanwhile, 12 respondents answered thatthey “Have already invested”, 10 respondents chose “Currently considering”, the total share of managers who
have already launched or has been considering the overseas real estate management business accounted for 40%.
Fig.32 Managers’ Involvement with the Overseas Real Estate Management Business（Respondents54）

No plans now or in the future

27

Have already invested

12

Currently considering

10

Decided not to invest after consideration but may consider again

3

Preparing for a invest after consideration1

Decided not to invest after consideration, and unlikely toreconsider in the future0

Invested in the past but currently not investing

1
0

5

10

15

20

25

30

4) 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 majority of managers chose“Strengthen property-acquisition capability”, “Enhancement of AM capabilities” in the last three times survey. In
this survey, the number of respondents who chose “Strengthen property-acquisition capability” (41respondents) far
exceeded the number of respondents who chose “Enhancement of AM capabilities” (22 respondents) (Fig.33)
Given the continued challenging market condition for acquisitions of properties, we consider that the numbers ofmanagers who attach high priority to strengthen property-acquisition capability have been increasing.
Fig. 33 Requirements for Sustainability and Growth of Managers (choosing up to three options)
41

Strengthen property‐acquisition capability

22

Enhancement of AM capabilities

18

Enhancement of equity raising capabilities

13

Enhancement of relations with investors

12

Management strategy and its explanatory ability

10

Entry into open‐ended funds business

8

Enhancement of research capabilities
Reinforcement of compliance structure

6

Competence in special expertise6
6

Enhancing the ability to handle foreign investors

5

Expansion of target property types

4

Expansion of foreign real estate fund management business

3

Enhancement of debt financing capabilities

2

Corporate strength (financial health, scale of operations)1

Sufficient of information disclosure
Capabilities for NPL investment activity

0

Strengthening of earthquake/disaster response capability0
1

Others0
July 15（n=158 Respondents54）

5

10

15

Jan 15（n=161 Respondents55）

13

20

25

30

35

July 14（n=162 Respondents53）

40

45

News Release September 4, 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.
Fixed property type:
Additional acquisition type:

Discretionary investment type:

Closed-ended fund:Open-ended fund:＜Management Style＞
Core:
Opportunity :Value-added:
Development:
Debt:＜Investment Area＞
Central 5 wards of Tokyo
Tokyo Metropolitan Area:
Kinki Area:
Nagoya Area:

A type of fund in which properties to be invested have been identified at the launch of the fundA 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
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.

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.
An investment style that lies between Core and Opportunity, and aiming at both income gains
and capital gains.
An investment style that specializes in achieving development gains.
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.
Chiyoda Ward, Chuo Ward, Minato Ward, Shinjuku Ward, Shibuya Ward
Tokyo excluding 23 Wards, Kanagawa, Saitama, and Chiba prefectures
Osaka, Kyoto, Hyogo, Nara, Wakayama, and Shiga prefectures
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.

14

News Release September 4, 2015

Contact:

Sumitomo Mitsui Trust Research Institute Co., Ltd
3F Hulic Kamiyacho Building. 4-3-13, Toranomon, Minato-ku, Tokyo
105-0001, Japan
https://www.smtri.jp/en/contact/index.html

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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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2. Although any materials provided by SMTRI, including this document, are prepared based on information
which SMTRI considers reliable, SMTRI cannot be held responsible for their accuracy or completeness. In
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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
not indicated with single values, but with multiple indications, ranges or distributions.

15