News Release2012 Japanese Investor Survey on Real Estate Investment
November 21st 2012
Sumitomo Mitsui Trust Research Institute Co., Ltd
From September to October, 2012, Sumitomo Mitsui Trust Research Institute Co., Ltd. conducted the“Japanese Investor Survey on Real Estate Investment”.
Target investors of this survey and methodology-Number of institutions to which questionnaires were sent:713
Of which, 542 institutions were pension funds, while 171 institutions were other institutional investors. “otherinstitutional investors” includes 100 banks (such as major banks, regional banks and trust banks) and 71 lifeand non-life insurance companies. In this survey “other institutional investors” is referred to as “institutional
investors”.
- Number of institutions which responded：137 (109 pension funds and 28 institutional investors)（response rate：19.2％）- Survey period： September to October, 2012
- Survey method：Distribution and collection of questionnaires by post
Pension funds and Other Institutional investors

Insurancecompanies1
2（43%）

Institutional
investors
28（20%）

Other Institutional investors

Banks
16
（57%）

Pension funds
109
（80%）
Respondents 137

Respondents 28

Executive summary of this survey
 Over 80% of the investors who responded to the survey had invested in alternatives (hedge funds, realestate, private equity, infrastructure funds, etc.) This indicates the increasing penetration of alternative
investments. However, the number of investors who invested in real estate (44) was limited toapproximately half of the number who invested in hedge funds (83).
As for their reason for investing in real estate, most respondents indicated it was due to the poor
performance of the traditional four asset groups (domestic bonds, domestic equities, foreign bonds, andforeign equities). The respondents purpose for real estate investment included “to increase returns” alongwith “diversification” and “to ensure stable cash flows.”

Regarding real estate products which were expected to be added soon, or increased in the future, pension
funds planning to invest in “private placement funds for investment in domestic real estate (open-end)”
represented the largest share of respondents in that category. Meanwhile, the largest share of institutional
investors indicated that they were planning to invest in J-REITs. The Pension Funds are focusing on the
product characteristics of “private placement funds for investment in domestic real estate (open-end)”,such as “smaller price fluctuations than listed products” and that a “certain redeemablity is maintained.”
Institutional Investors are likely to prefer J-REITs consisting of listed products for their current yields anda liquidity equivalent to that of equities.



As part of the infrastructure requirements for real estate investment, a number of investors pointed to the“assurance of and an increase in liquidity” and “adequate information disclosure.” Pension Funds thatinvested in real estate most often selected the “accuracy and improved reliability of real estate appraisal
values” second to that they chose “assurance of and an increase in liquidity.” This reflects the demand for
greater reliability in response to the increased awareness of pricing problems in real estate investment
caused bythe decline in property values since 2007.

1

News Release

November 21th 2012

Results of September 2012 Investor Survey on Real Estate Investment* The “n” in the graph represents the number of valid responses.

1.Past investment experience and current policy in alternatives(Questions directed at all the investors that were sent questionnaires)a) Past experience in alternative investments
Of all respondents, 84% answered that they had invested in alternatives in the past, as for Pension Fund
respondents, 83% had investment experience in alternatives. This indicates their increasing penetration ofalternative investments.
【Past experience in alternative investments】
All Respondents

Only Pension Funds
n=137

16%

n=109

17%

Yes

Yes

No

84%

No

83%

b) Reasons for not investing in alternatives
This question was directed at investors with no prior experience in alternative investments. Particularly among
Pension Funds, many investors replied “not included in targeted investments categories.” This suggests that anotable number of Pension Funds are limiting their investments to traditional assets such as equities and bonds.
This was followed by “investment risk is high,” “liquidity is low,” and “information disclosure seems
inadequate.”【Reasons for not investing in alternatives】
Pension funds：n=54（Respondents18）
Not included in targeted investments categories

Institutional investors：ｎ=16（Respondents3）

12Investment risk is highLiquidity is low

2

6

Information disclosure seems inadequate

2

4

Investment in traditional assets alone is enoughtotal 15

3

7

total 9
total 8

total 62
5

Lack of knowledge of alternative investments

5

Risk management and monitoring system of company (fund) is inadequate

3

No appropriate benchmarks

3

1

total 5
total 43

1

total 4

Commissions and cost for investment companies are highNo diversification benefit can be expected22Hard to select a satisfactory investment company

2

No investment product was found that conforms to our investment policy

1

Laws and tax accounting system seem inadequate

1

Minimum investment unit is too large
No products have been offered by investment management companies and trust …
Others1
02

total 3510Pension funds

215Institutional investors

20

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November 21th 2012c) Specific alternative investment products of investors currently investing in alternatives
Of all investors currently investing in alternatives, 83 respondents, the largest share,, answered that they had
invested in hedge funds. This answer was followed by “real estate” which accounted for half the number who had
invested in hedge funds. Pension Funds comprised 88% of all respondents in this category, which demonstrated
the importance of hedge funds as a major alternative investment for pension funds in Japan. As for Institutional
investors, real estate is evidently the most popular choice and forms the core of their investment strategy inalternatives.
【Specific alternative investment products of investors currently investing in alternatives】
Pension funds：n=162（Respondents 81）
Hedge funds

Institutional investors：ｎ=37（Respondents 21）

73

10

Real estate

26

Private equity

23

7

27

2 total 29

Infrastructure

18

total 83

total 44

total 30

13
Pension funds

Others020Institutional investors

40

60

80

100

2. Experience in and policy for real estate investment(Questions directed at Pension Funds and Institutional Investors that are currently invest in real estate)a) Objectives of and the background behind real estate investment
As for the reason for investing in real estate, a particularly large number of the Pension Funds that are currently
investing in real estate answered “the performance of the traditional four asset groups is unsatisfactory.”
When both Pension Funds and Institutional Investors were asked about the objectives of their real estate
investment, “for diversification” ranked first as an answer, followed by “to ensure stable cash flows” and “toincrease returns.” A significant proportion of both Pension Funds and Institutional Investors selected the same top
three answers suggesting that there exists some generally shared objectives between them.
【Background behind real estate investment （Pension Funds only）】
n=35（Respondents 23）
The performance of the traditional four
asset groups is unsatisfactory

14

Amount of assets under management islarge【Objectives of real estate investment】

Pension funds：ｎ=49（Respondents 24）

For diversification

Institutional investors：n=41

22

12

total 33

3

The fund is already mature

1

Need to reduce the burden on thecorporate entity

1

The performance of other alternative
investments is unsatisfactory1

Investment takes into account the
number of fund beneficiaries

To ensure stable cash flows

13

To increase returns

10

As a hedge against inflation15

total 2111

3 1 total 40

Pension funds

OthersOthers 12

150

total 28

5

10

15

20

3

0

total 310Institutional investors

20

30

40

50

News Release

November 21th 2012b) Breakdown of real estate assets under management
Of all respondent, 23 ranked both “private placement funds investing in domestic real estate (closed-ended)” and“J-REITs” first, implying a general preference for domestic real estate investment. While Pension Funds selected“private placement funds investing in domestic real estate (closed-ended)” as their primary assets, the first choiceof Institutional Investors was “J-REITs,” revealing their differing tendencies. More Pension Funds selected“foreign REITs” than “J-REITs,” which indicated a tendency to diversify globally by using listed products.
Meanwhile, more than 10% of respondents selected “Private placement funds investing in domestic real estate(open-ended),” indicating this category has had a growing popularity since their launch in 2010.
【Breakdown of real estate assets under management】
Pension funds：ｎ=46（Respondents 25）

Private placement funds investing in domestic real estate (closed‐ended)

Institutional investors：ｎ=41（Respondents 21）

17

J‐REITs

79

total 112

6

Domestic real estate debt

total 23

16

Foreign REITs
Private placement funds investing in domestic real estate (open‐ended)total 23

6

total 1048Direct real estate2

Fund of funds

total 7

5
3

Private placement funds investing in foreign real estate (closed‐ended)1

Foreign real estate debt

1
Pension funds

Private placement funds investing in foreign real estate (open‐ended)

Institutional investors

Others
0

5

10

15

20

25

c) Real estate products expected to be added soon or increased in future investments
The number of respondents that chose “Private placement funds investing in domestic real estate (open-ended)”
was the largest, at 14, of which 11 were Pension Funds. The latter are focusing on product characteristics such as“smaller price fluctuations than listed products” and “a certain redeemablity is maintained.” Institutional Investors,
on the other hand, are likely to prefer J-REITs for their current yields and the fact that their liquidity is equivalent
to equities due to their listed status. A notable 13 respondents, of which 10 were Pension Funds, answered,“nothing in particular,”. This indicates that a certain number of investors do not plan to increase their real estate
investments in the future, despite the fact that they are already holding real estate assets.
【Real estate products expected to be added soon or increased in future investments】
Pension funds：ｎ=43（Respondents 24）

Private placement funds investing in domestic real estate (open‐ended)

Institutional investors：n=31（Respondents 21）

11

J‐REITs1
5

Direct real estate

1

2

4

Private placement funds investing in foreign real estate (closed‐ended)

2

3

1

2

1

total 3Fund of funds

2

1

total 3Foreign real estate debt

2

1

total 3

1

1

total 2Others11total 2

total 6

total 4

Private placement funds investing in foreign real estate (open‐ended)

Foreign REITs

total 7
total 6

5

Domestic real estate debt

Nothing in particular

total 11

10

Private placement funds investing in domestic real estate (closed‐ended)

Pension funds

10
0

4

total 143

5

Institutional investors

3
10

total 13
15

News Release

November 21th 2012

3. Preferred real estate investment categories(Questions directed at Pension Funds and Institutional Investors that invest in real estate)(See the “Glossary” at the end of this document for “investment style,” “level of discretion of investment company
regarding investment timing and redeemability,” and “investment areas.”)a) Investment style (risk level)【Investment style (risk level)】
The responses of both Pension Funds andInstitutional Investors were concentrated in“core” investments, which focus on stable
income. This suggests that domestic investors
are drawn to less risk-averse investment styles.

Pension funds：ｎ=27（Respondents 22）
Core

Institutional investors：n=24（Respondents 16）

20

Value‐added6

Opportunity

3

15

5

total 35

total 11Development 1 1 total 2

0

10

20

30

Pension funds

40

Institutional investorsb) Redeemablity and the level of discretion of the investment management company
regarding investment timing【Redeemablity and the level of discretion of the investment
management company regarding investment timing】“Fixed investment (closed-ended),” in which thereal estate invested in is fixed and generally notredeemable, was the most popular response. Thiswas followed by “open-ended investment,” inwhich a certain redeemablity is maintained andadditional investments are made at the discretionof the investment company after investment. Veryfew respondents selected “additional investment(closed-ended)” or “discretionary investment(closed-ended),” which are generally notredeemable and for which
the investmentcompany determines
the investment timing, reflecting their
low popularity among domestic investors.

Pension funds：ｎ=29（Respondents 21）

Institutional investors：n=17（Respondents 14）

Fixed investment (closed‐ended)13

Open‐ended investment

710Additional investment (closed‐ended)total 199

1 total 6

5

Discretionary investment (closed‐ended)total 20

1
0

10

20

Pension funds

30

Institutional investorsc) Investment areas【Investment areas】
Regarding the geographical areas targeted forinvestment, the “23 wards of Tokyo” ranked highest,with 25 responses, and the “Tokyo metropolitanarea” ranked second, with 23 responses. The total
for these two comprised 70% of all responses, andnotably few selected other areas for investment. Thisimplies that most domestic investors consider Tokyoand its surrounding areas to be more stable andappropriate for investment than other areas.

Pension funds：ｎ=36（Respondents 22）
23 wards of Tokyo

Institutional investors：n=31（Respondents 15）

12

Tokyo Metropolitan area

15

Kinki area

4

Nagoya area

3

Local area

2

total 72 1 total 3

Others0510Pension funds

5

total 23

8
total 84
3

total 25

13

15

20

25

Institutional investors

30

News Release

November 21th 2012d) Types of properties to invest in【Types of properties to invest in】“Offices” ranked highest among responses,
followed by “residential,” “commercial
facilities,” and “logistics facilities.” Among
Pension Funds, “residential” was the first choice
for many investors, perhaps due to their focus
on stable cash flows and transaction liquidity.

Pension funds：ｎ=75（Respondents 22）

Institutional investors：n=59（Respondents 17）

Office16

17

Residential

18

13commercial facilities

12

logistics facilities

10

12

total 33
total 31

total 24

11

total 21

total 8

Health‐care center

5

3

Residential care home5

2 total 7

Hotel

5

1

Others4

Pension funds

total 6

Institutional investors

0

10

20

30

40

e) Expected real estate investment period
Among Pension Funds, 41% of respondents, the most, chose “3 to 5 years.” This was followed by “5 to 7 years,”
selected by 36% of respondents. The total for these two groups comprised 77% of all responses for a period of “3to 7 years”. Despite the general impression of real estate being a long-term investment, this result reveals thatmany Pension Funds are opting out of long-term investments in their decisions regarding individual products.
Institutional Investors were divided between “more than 10 years,” which the most—38%—chose, and “3 to 5
years,” which was the second most popular option, chosen by 31%. This suggests that real estate investment
periods vary depending on the type of investor and the type of product invested in.
【Expected real estate investment period】
Pension Funds
More than
10 years, 9%

1 to 3 years,
5%

Other Institutional Investors
n=22

More than
10 years,
38%

7 to 10years, 9%

1 to 3 years,
13%

n=16

3 to 5 years,
31%

3 to 5 years,
41%
5 to 7 years,
36%
7 to 10years, 6%

5 to 7 years,
13%f) Expected returns【Expected returns】
The “overall yield expected from real estate
7.6%
8.0%
investment” was approximately 2% higher than
7.0%
the “overall yield expected from all assets” for
6.2%
5.6%
Pension Funds and 3% higher for Institutional
6.0%
5.5%
4.9%
4.8%
Investors, reflecting the demand for relatively
5.0%
3.6%
high returns on real estate investment. The
4.0%
3.2%
“single-year dividend yield expected from real
3.0%
estate investment” was generally at the same
2.0%
level for both Pension Funds and Institutional
1.0%
Investors, at 4.8% and 4.9%, respectively.
0.0%
However, the “overall yield expected from realIRR (gross)single‐year
overall yieldoverall yield
expected from all expected from real dividend yield expected from realestate investment” and “IRR (gross) expected
estate investment expected from real estate investment
assetsfrom real estate investment” were higher for
estate investment
Institutional Investors. This may be a result ofPension funds
Institutional investors
Pension Funds focusing on income gains onreal estate, in contrast to Institutional Investors’ expectations of a return on investment that includes
capital gains.

6News Release

November 21th 2012

4. Investor expectations for real estate investment management companies(Questions directed at Pension Funds and Institutional Investors that currently invest in real estate)a) Criteria for selecting an investment management company
The most popular criterion for selecting an investment company was “past investment results,” indicating theemphasis on performance. This was followed by “credit” and “appropriate information disclosure.”
Among Pension Funds, most respondents chose “past investment results” and “risk management and compliancesystem.” The tendency to focus on the “risk management and compliance system” has likely been increasing since
the AIJ scandal.
【Criteria for selecting an investment management company】
Pension funds：ｎ=144（Respondents 23）
Past investment results

17

total 30
13
total 28
8
total 24
12
total 22
11
total 22
11
total 19
4
total 178
total 16

13

Appropriate information disclosure

15

Risk management and compliance system

16

Ability to acquire properties

10

Prompt reports and responses to investors

11

Effectiveness of investment strategy

8

Investment philosophy

13

Quality of personnel organization8

Prompt responses to changes in market conditions

7

Ability to obtain debt financing

8
10

4

Ability to explain products and risk

6

6

Quality of investment reports to explain

5

7

System to prevent conflicts of interest

82Consistency of investment strategy
Specific numerical targets for returns

3

3

total 15
total 14
total 12
total 12

total 10
total 93

6

total 34

18

16

CreditOthersInstitutional investors：n=147（Respondents 20）

Pension funds
Institutional investors

total 6

1

0

10

20

30

40

b) Necessity of regular asset valuation for real estate investment
Of all investors, 90% responded that “regular market valuation is necessary,” with 86% of Pension Funds
indicating this.
Valuation frequency was divided between “every quarter,” “every half year,” and “once a year,” with generally athird of all respondents selecting each.
【Necessity of regular asset valuation for real estate investment】
All Respondents
Regularmarketvaluation isnotnecessary,
5%

Not sure,
5%

Only Institutional Investors
Regularmarketvaluation isnotnecessary,
9%

n=41

Regularmarketvaluation isnecessary,
90%

Not sure,5%

n=22

Regularmarketvaluation isnecessary,86%

7

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November 21th 2012

【Frequency of asset valuation for real estate investment】
All Respondents
Every
three
years, 5%

Only Pension Funds
n=19（Respondents 19）

n=39（Respondents 37）

Once ayear, 37%

Everyquarter,
28%

Once ayear, 33%

Everyquarter,
32%

Every half
year, 32%

Every half
year, 33%

5. Open-ended private placement real estate funds(Questions for all investors that were sent questionnaires)a) Investor consideration for open-ended private placement real estate funds
Among investors who responded that they are not currently investing in real estate, 35% indicated that they had
never heard of an open-ended private placement real estate fund, and weren’t considering them.
However, there was a high recognition of this fund among investors who are currently investing in real estate, andthose who “have never heard of the name and are not considering them” were limited to 7%. The total of those
who responded that they were “interested” and “may possibly make an investment in the future” was 34%,
indicating a relatively high degree of interest among real estate investors in an open-ended private placement realestate fund.
【Investor Consideration of investment in an open-ended private placement real estate funds】(Questions directed at “investors that are NOT currently investing in real estate”)
All Respondents
Only Pension Funds
May possibly
make theinvestment in
the future,
11%
Interested, 8%Have heard of
the name but
are not
considering
them, 43%

May possibly
make theinvestment in
the future,11%n=65（Respondents 64）

Others, 3%
Have neverheard of thename and arenotconsidering
them, 35%n=62（Respondents 61）

Others, 3%
Have neverheard of thename and arenotconsidering
them, 37%

Interested, 8%Have heard of
the name but
are not
considering
them, 40%

(Questions directed at “investors that are currently investing in real estate”)
Only Pension Funds
All Respondents

Others, 20%

May possibly
make theinvestment in
the future,
17%

Have neverheard of thename and are
not considering
them, 7%

Have neverheard of thename and are
not considering
them, 10%n=41

Others, 24%

Have heard of
the name but
are not
considering
them, 39%

May possibly
make theinvestment in
the future,
19%

Interested,
17%

8Interested,
10%

Have heard of
the name but
are not
considering
them, 38%n=21

News Release

November 21th 2012b) Awareness of open-ended private placement real estate funds(Questions directed at “investors that are NOT currently investing in real estate”)
The most common answer was “don’t know/not sure,” demonstrating again the low level of recognition.
Pension funds：ｎ=110（Respondents 63）

Don’t know/not sureInstitutional investors：n=12（Respondents 3）

37

Understand that liquidity is low due to restricted redemption

12

A certain amount of liquidity can be expected despite restricted redemption

11

1

total 12

Appropriate for long‐term investors (Pension Funds and Institutional Investors)

11

1

total 12

1 total 13

Although the equity price for redemption is calculated based on appraisal value,
one can’t be sure the price is appropriate
Unlisted assets with a lower risk of price volatility than listed REITs

7

Limited range of available products

6

The leverage of many products is low and the refinancing risk is low

4

A closed‐end investment with a fixed investment period is a better match for ourinvestment position
Listed REITs with higher liquidity are more attractive

21

total 3

Hesitant to invest due to less requirement for disclosure than listed J‐REITs

12

total 3

Will make an investment decision after confirming performance21

total 3

Despite the low liquidity, the yield is lower than listed REITs 1 1

total 2Concerned about a conflict of interest, as group companies are operating otherfunds and listed J‐REITs

1 1 total 2

The yield does not seem low, as the price volatility is low

1

A product from which a sufficient return can be expected in exchange for the risk 1
The return is low
Others21
0total 31020Pension funds

9

30

40

Institutional investors

50

News Release

November 21th 2012c) Awareness of open-ended private placement real estate funds(Questions directed at “investors that are currently investing in real estate”)
The answer “unlisted assets with a lower risk of price volatility than listed REITs” was selected the most, followedby “a certain amount of liquidity can be expected despite restricted redemption.”
Pension funds：ｎ=80（Respondents 24）

Institutional investors：n=65（Respondents 20）

total 23

Unlisted assets with a lower risk of price volatility than listed REITs

11

A certain amount of liquidity can be expected despite restricted redemption

10

12

total 22

Appropriate for long‐term investors (Pension Funds and Institutional Investors)

10

11

total 21

Will make an investment decision after confirming performance

12

9

5

Understand that liquidity is low due to restricted redemption

7

4

total 11The leverage of many products is low and the refinancing risk is low

7

4

total 11

Although the equity price for redemption is calculated based on appraisal value,
one can’t be sure the price is appropriate

74

total 11The yield does not seem low, as the price volatility is low

42

total 6

Concerned about a conflict of interest, as group companies are operating otherfunds and listed J‐REITs

4

2

total 6

Limited range of available products

3

total 5

2

Don’t know/not sure2

2

A closed‐end investment with a fixed investment period is a better match for ourinvestment position

2

1 total 3

total 4

Hesitant to invest due to less requirement for disclosure than listed J‐REITs

1 1 total 2

A product from which a sufficient return can be expected in exchange for the risk

1 1 total 2

Listed REITs with higher liquidity are more attractive

total 14

1

Despite the low liquidity, the yield is lower than listed REITs
Pension funds

The return is low

Institutional investors
Others

2
0

10

1
5

10

15

20

25

News Release

November 21th 2012

6. Investor requirements for real estate investment(Questions for all investors that were sent questionnaires)a) Current attitude toward real estate investment
The answer selected the most by “investors not currently investing in real estate” was “not planning to consider
real estate investments.” On the other hand, the top three responses of “investors currently investing in real estate”
indicated a positive attitude toward real estate investment. It may be concluded that investors that are alreadyinvesting in real estate tend to consider further investments in real estate, while those not investing in real estate
are not likely to consider such investments.
【Current attitude toward real estate investment】(Questions directed at “investors that are NOT currently investing in real estate”)
Pension funds：n=65（Respondents 64）

Institutional investors：ｎ=3（Respondents 3）

Not planning to consider real estate investments

34

Regarded as one of the investments to be considered217Less likely to be considered than other alternative investments

9More likely to be considered than other alternative investments

total 19

1 total 10

3Planning to make investments in the future

OthersPension funds
Institutional investors

2
0

10

20

30

40

50

(Questions directed at “investors that are currently investing in real estate”)
Pension funds：ｎ=35（Respondents 24）
An area to be considered for investment among all categories ofinvestment

Institutional investors：n=24（Respondents 21）

119More likely to be considered than other alternative investments

4

5

total 9Will increase real estate investments in the future

4

4

total 8Will decrease real estate investments in the future

4

Despite apetite, we will not invest due to having reached realestate allocation limit

322Less likely to be considered than other alternative investments

5

Due to bad past performance, we will not be investing for thetime being

4

total 20

total 6
total 5Pension funds

Don’t regard real estate as an investment worth considering

Institutional investors

Others

2
0

11

10

20

30

News Release

November 21th 2012b) Investor requirements for real estate investment
Irrespective of whether or not they invest in real estate, many investors selected aspects including “assurance ofand an increase in liquidity” and “adequate information disclosure” as part of the infrastructure requirements forreal estate investment.
A significant number of “Pension Funds currently investing in real estate” selected “assurance of and an increasein liquidity,” which was followed by “the accuracy and improved reliability of real estate appraisal values.” The
results revealed that Pension Funds with experience in real estate investment are demanding reliable pricing forreal estate investments in response to the decline in real estate prices since the bankruptcy of Lehman Brothers.
【Conditions and infrastructure requirements for real estate investment】(Questions directed at “Pension Funds that are NOT currently investing in real estate”)
n=235（Respondents 62）
Assurance of and an increase in liquidity

47

Accuracy and improved reliability of real estate appraisal values

29

Offer of investment products that conform to our investment policy

27

Mechanism to control the risk of price volatility

24

Adequate information disclosure by the investment management company, trust bank, etc.
when investing

19

Development of a real estate fund indicies to serve as a benchmark

13

Holding of seminars for pension funds on real estate investment

13

Investment ability of real estate investment management companies

12

Appropriate reports on investments provided by the investment management company, trustbank, etc. during the investment period

12

Strengthening of the trust bank’s due diligence and monitoring functions

11

Expansion of the real estate product indicies that serves as a benchmark

9

The investment management company understands the investment requirements of pension
funds

8

Reduced commissions charged by real estate investment management companies

4

Skills of pension consultants need enhancing

4

Others

3
0

10

20

30

40

50

Questions directed at “Institutional Investors that are NOT currently investing in real estate”)
n=17（Respondents 3）
Adequate information disclosure by the investment management company, etc. …

3

Appropriate reports on investments provided by the investment management…

3

Strengthening of the in‐house due diligence and monitoring functions

3

Accuracy and improved reliability of real estate appraisal values

2

Offer of investment products that conform to our investment policy

1

Investment ability of real estate investment management companies

1

Expansion of the real estate product indicies that serves as a benchmark

1

Development of a real estate fund indicies to serve as a benchmark

1

Assurance of and an increase in liquidity

1

Holding of seminars for institutional investors on real estate investment

1

Mechanism to control the risk of price volatility0Reduced commissions charged by real estate investment management companies

0

The investment management company understands the investment requirements of … 0
The presence of a real estate investment consultant

0

Others

0
0

12

1

2

3

4

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November 21th 2012

【Infrastructure requirements for real estate investment】(Questions directed at “Pension Funds that are currently investing in real estate”)
n=113（Respondents 24）
Appropriate reports on investments provided by the investment
management company, trust bank, etc. during the investment period
Adequate information disclosure by the investment managementcompany, trust bank, etc. when investing

16
12

Investment ability of real estate investment management companies

11

Offer of investment products that conform to our investment policy

10

Accuracy and improved reliability of real estate appraisal values

10

Strengthening of the trust bank’s due diligence and monitoring functions

10

Assurance of and an increase in liquidity

9

Mechanism to control the risk of price volatility

8

Reduced commissions charged by real estate investment managementcompanies

7

Development of a real estate fund indicies to serve as a benchmark

5

Skills of pension consultants need enhancing

5

Holding of seminars for pension funds on real estate investment

4

The investment management company understands the investment
requirements of pension funds

3

Expansion of the real estate product indicies that serves as a benchmark

2

Others

1
0

2

4

6

8

10

12

14

16

18

(Questions directed at “Institutional Investors that are currently investing in real estate”)
n=97（Respondents 22）
Assurance of and an increase in liquidity

17

Adequate information disclosure by the investment managementcompany, etc. when investing
Appropriate reports on investments provided by the investment
management company, etc. during the investment period

1212Offer of investment products that conform to our investment policy

11

Investment ability of real estate investment management companies

11

Accuracy and improved reliability of real estate appraisal values

8

Strengthening of the in‐house due diligence and monitoring functions

8

Mechanism to control the risk of price volatility

6

Expansion of the real estate product indicies that serves as a benchmark

5

Development of a real estate fund indicies to serve as a benchmark

3

The investment management company understands the investment
requirements of pension funds
Reduced commissions charged by real estate investment managementcompanies

2
1

Holding of seminars for institutional investors on real estate investment

1

The presence of a real estate investment consultant

0

Others

0
0

13

2

4

6

8

10

12

14

16

18

News Release

November 21th 2012

Definitions of Terms
Real Estate Investment:
・Investment in Privately placed real estate fund (refer to the Privately placed real estate fund below)
・Investment in listed REIT（Including both J-REIT and foreign REIT）
・Investment in real estate debt(Including domestic and foreign NRL)・Fund of funds

Privately placed real estate fund：The privately placed real estate fund is a structure under which investors’ funds are managed by professional investment managers.
In this report, commingled funds that are designed for multiple investors, and separate accounts, investment programs for single
investors are both categorized as privately placed funds. This does not include products governed by the Act Concerning
Designated Real Estate Joint Enterprises. Privately placed real estate fund is classified into the following 2 categories.
1. Level of discretion of investment company regarding investment timing and redeemablity
Closed-ended fund：This refers to privately placed real estate funds without cancellation and reimbursement throughon the management period. In addition, Closed-ended fund is classified into the following
3categories.

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： 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 typeOpen-ended fund：This refers to privately placed real estate funds without stipulations on the management period.
The system enables participation, cancellation and reimbursement for a certain period. The
value of the investment is calculated based on the appraisal value at the time.

2. Management Style
Core style：An investment style in which stable long-term investments are envisaged by investing in soundproperties generating steady income flows.

Opportunity style：An investment style in which high-risk high-return investments are contemplated, such as
investments in currently unstable properties seeking for a large capital gain by increasing value
with improvement of asset and/or management, by betting on the market cycle, or by employing
a large discount power for bulk transactions. Opportunity style may exploit various
opportunities, such as investment in development type projects and corporate stocks.

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

Development style：An investment style that specializes in achieving development gains.

Investment Area:
Tokyo Metropolitan Area：

Tokyo excluding 23 Wards, Kanagawa, Saitama, and Chiba Prefecture

Kinki Area：

Osaka, Kyoto, Hyogo, Nara, Wakayama, and Shiga Prefecture

Nagoya Area：

Aichi, Gifu, and Mie Prefecture

Regional Area：

Except Tokyo Metropolitan Area, Kinki Area and Nagoya Area

IRR (Gross) ：The internal Rate of Return (IRR) is the discount rate that makes the present value of future
cash flow of an investment equal to its current value of the investment.

14

News Release

November 21th 2012

Contact:

Sumitomo Mitsui Trust Research Institute Co., Ltd
3F Kamiyacho Central Place. 4-3-13, Toranomon, Minato-ku, Tokyo
105-0001, Japan
https://www.smtri.jp/english/contact/form-private/private_fund.html

http://www.smtri.jp/

Disclaimer:
1. Any materials provided by Sumitomo Mitsui Trust Research Institute (hereafter, “SMTRI”), including thisdocument, are for informational purposes only, and are not intended to invite, solicit, mediate, broker, or saleproducts including real estate and financial instruments, services, rights or other transactions. Please use yourown judgment when making final determinations on securities selection, investment decisions or use of thisdocument.
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 addition, as
this document was prepared based on the information available at the time of preparation or research, all contents
provided herein represent the judgments at the time at which the material was prepared. The contents of thisdocument are subject to change without prior notice.
3. All rights related to this document are reserved by SMTRI. Copying, reproduction or revision of this document,
in whole or in part, is not permitted without the prior consent of SMTRI, irrespective of the purpose or method.
4. SMTRI is not a real estate appraiser, nor provide clients with any appraisal reports on real estate properties.
SMTRI is a real estate investment advisor authorized by the related Japanese law and regulation, and conducts
advisory services for investment judgments based on the values or value analyses of investment products. In theprocess of implementing advisory services, SMTRI may calculate asset values of real estate properties. However,such calculations are for the necessity of implementing advisory services, and calculated values are not indicatedwith single values, but with multiple indications, ranges or distributions.

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