NEWS RELEASE
Survey on Privately Placed Real Estate Funds in Japan
July 2011 Survey – Results
August 26th 2011
STB Research Institute Co., Ltd

Since 2003, STB Research Institute Co., Ltd. has been conducting the “Survey on Privately Placed Real
Estate Funds” in Japan as part of its research on the real estate investment market. This release is for thetwelfth such survey based on responses received from 69 real estate investment management companies.
 Respondents: Real estate investment management companies engaged in origination andmanagement of privately placed real estate funds investing in domestic real estateNumber of companies to which questionnaires were sent: 140



Number of companies responded: 69 (ratio of valid responses: 49.3%)

Time of survey: July 2011Survey method: Distribution and collection of questionnaires by post and e-mailBased on the responses to this survey, hearings and published information, we estimated the market size ofprivately placed real estate funds as of the end of June 2011 to be 15.9 trillion yen (on an invested asset
basis), which increased approximately 180 billion yen (1.2%) over a six-month period from the 15.7
trillion yen of the previous January 2011 survey.

Market size of privately placed real estate funds is 15.9 trillion yen, reaching 17.6 trillion yen when combinedwith global funds

STB Research Institute has been estimating the market size of privately placed real estate funds since 2003
based on the responses to the survey, hearings from real estate investment management companies (hereafter
called “managers”), and published information. As of the end of June 2011 the market size (on an invested
assets basis) is estimated to be 15.9 trillion yen, which increased approximately 180 billion yen (1.2%) over a
six-month period from the 15.7 trillion yen (end of December 2010) that was estimated in the January 2011
survey
In this survey, some managers appeared to have decreased their assets under management by selling property,
while others increased their assets by acquiring new property in light of further improvement in the debt
financing environment. As a result, overall assets under management increased slightly.
The effects of the Great East Japan Earthquake on the market of privately placed real estate funds have been
limited. However, a majority of managers believed that the nuclear power plant accident had become an
obstacle for overseas investors in considering real estate investment in Japan.

The figure of 15.9 trillion yen is the total invested assets for specialized funds in domestic real estate, which
does not include the assets located in Japan which are managed by global funds (Note). When these assets are
combined, we estimate that the total market size to be 17.6 trillion yen.
（Note) Global funds: defined by STBRI as meaning those funds managed by foreign-based investment managers
which target investments in both Japan and other foreign markets.

1NEWS RELEASE（Trillion yen）

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August 26 2011

Trends of Market Size of Privately Placed Funds and J-REITs

18.0
16.0

15.3

15.2

14.7

15.0

16.2

15.7

15.9

14.0
11.0

12.0
10.0
8.0
6.0
4.0
2.0

2.2
2.1

3.3
2.6

4.4
3.4

5.5
4.5

6.1
5.4

6.7

6.1

7.4

7.4

7.5

7.6

7.8

7.8

8.0

Jun-08Dec-08Jun-09Dec-09Jun-10Dec-10Jun-11

6.8

0.0
Dec-04

Jun-05

Dec-05

Jun-06

Dec-06

Jun-07

Dec-07

Assets under management (Privately Placed Funds)

Assets under management (J-REITs)

source: STB Research Institute“ Survey on Privately Placed Real Estate Funds”

July 2011 Survey Results(Note) [n] shown in the charts throughout this document indicates the number of effective responses.

1. Current Status of Fund Management
Fig. 1: Breakdown of Commingled Funds andSeparate Accounts

1）Breakdown of Commingled Funds and Separate
Accounts:
This survey categorized privately placed funds into

100%

“commingled funds” that are managed for multiple

80%

25%
11%

investors, and “separate accounts” managed for single

60%

26%
19%

13%
29%

13%

6%

16%

17%

23%

27%

61%

62%

56%

10/07
(n=56)

11/01(n=54)

11/07(n=60)

Separate accounts

Others34%
37%

investors. AUM of the commingled funds managed by40%

the respondents accounted for 56%, while the separate

64%

accounts made up 27%. The share of the commingled

20%

funds declined, while that of separate accounts

0%

55%

58%

50%

07/12 09/01 09/07
10/01（n=37) (n=43) （n=57) (n=51)

increased. The activity to launch commingled funds
had been recovering according to the July 2010 survey,

Commingled funds

this trend continued, however, the July 2011 survey
showed a slight slow down in activity.
2）New Funds Launched From January to June 2011
～New Launch, Type, Style, and Period～

Out of a total of 67 respondents, 19 (28%) answered that they launched new funds during the period fromJanuary to June 2011. Trends since the July 2009 survey show that approximately 30% of managers have beenraising new funds in the first half of each year. This was partly attributable to the fact that there was always acertain level of demand for real estate equity investments, irrespective of fluctuations in the financing
environment or the real estate market fundamentals.
The number of newly launched funds was 31, which is a great reduction from the 54 in the July 2010 survey.
Of the newly launched funds, the Fixed Property Type accounted for 82%, an increase from 68% in the July 20092

thAugust 26 2011

NEWS RELEASE

survey, while the Additional Acquisition Type fell to 0% from 16%. With regard to the investment style, the CoreType accounted for 47%, falling substantially from 83% in the July 2009 survey, while the Value-added Type andOpportunity Type accounted for 24% each.
Since there was a limited number of responses, a clear trend of types of newly launched funds could not be
identified in the latest survey. However, the result showed that the ratio of the Fixed Property Type increased,
while that of the Core Type declined. It was also found that the number of the Fixed Property Type along with theValue-added Type and the Opportunity Type increased. This mainly reflected the fact that there were funds thattargeted distressed properties that failed to arrange refinancing, or properties whose already extended loan
maturities was arriving, and that there were some investors who could accept a certain level of risk. Meanwhile,
since investors grew increasingly cautious about the selection of investment properties, the number of launches of
Fixed Property Type funds, whose properties are disclosed to investors in advance, is believed to have risen.
With regard to the investment period, funds with periods of between one and three years accounted for 18%,
falling from 35% in the July 2009 survey, while funds with periods of between three and five years rose to 59%
from 29%. The funds with periods of five years or more that accounted for 36% in the July 2009 survey fell to
18% in the July 2011 survey. The percentage of funds with medium terms of between three and five years rosecompared to the funds with short or long terms.
※Fig. 3～5 show the data of newly launched funds in the first half of each year
Fig. 2: Fund Manager’s Activity of Launching
New Funds in the First Half of Each Year

Fig.3: Type of Funds

100%
80%
60%

74%

72%

40%
26%

30%

28%

09/07
(n=65)

10/07（n=66）

11/07（n=67）

0% 11%
6%

82%

09/07
(n=19)

10/07（n=20）

11/07（n=17）

Fixed property type
Discretionary investment type

Didn't launch

5%

6%

100%

21%

24%

80%

24%

60%

6%
10%
19%

12%

29%

43%

59%

35%

24%
5%

18%
6%

10/07
（n=21）

11/07（n=17）

24%
12%

83%

40%
53%

20%

47%

20%

0%

0%

0%
09/07
(n=18)
Value‐added

Additional acquisition type
Open‐ended

Fig. 5: Investment Period

21%

60%

Core

75%

20%

Fig. 4: Investment Style

40%

68%

0%

0%

Launched

80%

12%

16%

20%
5%

60%

0%

100%

16%

80%
70%

40%
20%

6%

100%

10/07
（n=19）
Opportunity

11/07（n=17）

09/07(n=17)
Within 1 year
5～7 years

Development

3

1～3 years
More than 7 years

3～5 years

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August 26 2011

～Reasons for Not Having Launched Funds～

Fig. 6: Reasons for Not Having Launched Funds

Seventy two percent of respondents answered thatn=64（Respondents47）

they did not launch any new funds during the period

27%

from January to June 2011 (Fig 2). Among the reasons

36%

for this was, “Difficulty in equity raising” which
accounted for 27%, this remained unchanged from 26%
in the July 2010 survey. The second main reason was
2%2%“Because of the Great East Japan Earthquake and thenuclear power plant problems”, this accounted for 22%,

Difficulty in equity raisingwhich clearly indicated that the earthquake affected the

Because of the Great East Japan Earthquake and the nuclear
power plant problems
Taking a wait and see attitude

launch of new funds.
Meanwhile,“Takingawait-and-see

22%
13%

attitude”,

Anticipating further decline in priceaccounted for 13%, down from 20% in the July 2010

Uncertainty over the rental market

survey. “Others” stood at 36%. Among the respondents

Otherschoosing “Others”, nine companies referred to theshortage of appropriate investment properties, including the situation in which properties that met investors’ needs
were not available, while six companies said that they were in the period of preparing to launch new funds.
3）Circumstances of Debt FinanceWith respect to the circumstances of debt financing, respondents answered by choosing from 1 (most severe) to
5 (least severe). In the January 2011 survey (fig 7), level 3 accounted for 53%, but level 4 accounted for 61% in
the July 2011 survey, expressing improved sentiment for the debt finance environment. The debt financing
conditions rapidly deteriorated after the collapse of Lehman Brothers, but began to improve in the January 2010
survey, and continued to improve until the July 2011 survey. Reasons for choosing level 4 or level 5 included
lenders taking a more active lending stance, a loosening of lending requirements, and even in some cases lenders
competing with each other.
Fig. 7: Circumstances of Debt Finance【January 2011survey】【July 2011 survey】（Respondents67）（Respondents62）

severe

5

5

4

4

3.75

3.5

3

3

2

2

1

1
0

10

20

30

40

0

4

20

40

60

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August 26 2011

Responding to a question on how debt

Fig. 8: Which Lending Conditions Improved?

finance circumstances changed compared
with

the

periodbetween

July

5%

and

December 2010, 30% of the respondents

n=131（Respondents48）

3% 2%
29%

15%

Increase of lenders considering new lending

stated “Unchanged” while the category of“Slightly

improved”

andExpansion of underwriting areas and types“Improved”

together accounted for 70%. Regarding

Contraction of interest spread

Rise of LTV
Increase in number of loans

18%

specific improvement, of the 70% ofModeration of covenants on LTV, DSCR, etc.

28%

respondents, 29% chose “Contraction of

Othersinterest spread” followed by “Increase of
lenders considering new lending” accounting for 28%, “Expansion of underwriting areas and types” accounted
for 18%, and “Rise of LTV” accounted for 15%. These responses indicated that the debt finance environment had
noticeably improved.
4) Circumstances of Equity Raising～Appetite of Equity Investors～

Fig. 9: Appetite of Equity Investors for Investment

With respect to the Appetite of Equity
Investors, 61% of respondents answered

100%

7%

16%

18%
80%

the share for “Declining” which accunted

40%

for only 1% and 2% in the July 2010 and

20%

that

equityinvestors’

appetite

for

45%
46%

24%
0%

The results of the latest survey showed

61%

74%

54%

January 2011 survey, increaased to 20%.

54%

62%

83%

59%

20%
45%

“Unchanged”. Meanwhile “Rising” fell to
20% from 44% in the January 2011 survey,

2%

34%

41%

60%

1%

9%
06/12
(n=34)

07/12(n=37)

13%

15%
2%

20%

08/07
(n=54)

09/01(n=48)

09/07
10/01 10/07 11/01
11/07(n=64) （n=55）（n=67）（n=61）（n=66）

Risinginvestment that had been improving, has

44%

31%

Unchanged

20%

Declining

actually dramatically deteriorated. This apparently reflected the effects of the Great East Japan Earthquake and thenuclear power plant problems.
～Investment Attitude of Equity Investors ( By Investors Category)～
The managers answered that among domestic investors, 34% of Domestic Pension Funds and 25% ofDomestic Union Financial were “Considering real estate investment as the core long-term investment”, while
19% and 21% of them believed that they “Will not invest in the immediate future, given the bad performance inthe past”. Therefore there were two distinct groups of investors, those who actually experienced losses in the past
due to the fact that they began investing when real estate prices had risen to high levels, and those who wereconsidering making investments in the future. Among foreign investors, Foreign Pension Funds and Sovereign
Funds showed a positive attitude toward investments, with 23% and 22%, respectively, choosing the answer“Considering investment as the core long-term investment” However, 27% of Foreign Pension Funds and 16% ofSovereign Funds responded that they were “Suspending investments since the Great East Japan Earthquake” – ananswer that was not so common among domestic investors. Among foreign investors, the managers answered that5NEWS RELEASE

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August 26 2011

Foreign Pension Funds and Sovereign Funds showed a positive attitude toward investments, with 23% and 22%,
respectively, choosing the answer “Considering investment as the core long-term investment” However, 27% of
Foreign Pension Funds and 16% of Sovereign Funds are believed to be “Suspending investments since the Great
East Japan Earthquake” – an answer that was not so common among domestic investors.
Fig. 10: Investment Attitude of Equity Investors
100%

4%
7%
2%
5%

90%

4%
4%
4%

80%

19%

70%

1%
1%

21%

60%

11%

2%
7%

3%

No changes in investment stance the Great East Japan Earthquake

8%

27%

50%

11%
40%

12%

Investments have been suspended since the Great East Japan Earthquake
Will not invest in the future due to BIS regulations

16%

Will not invest in the future, given the high risk of real estate

3%
3%
9%
3%
10%

4%
2%
2%
2%
8%

Will not invest in the immediate future, given bad performance in thepast
Cannot embark on investment given uncertainty over the unstablefinancial market
Unwilling to invest because of lack of growth potential in GDP,
consumption, and population
Cannot embark on investment given uncertainty over the rental market

22%

34%
30%

25%

23%

20%

Waiting for real estate prices to cease to fall, though willing to invest

16%
Considering investment as the core long‐term investment

10%

19%

0%

11%

8%

8%

4%
2%

5%
3%

8%

Began investing as the core long‐term investment
Considering investment as a good opportunity to earn capital gains

Domestic pension Domestic union Foreign pension Sovereign funds
funds
financialfunds(n=50)(n=79)(n=56)(n=78)

Began investing as a good opportunity to earn capital gains～Increases and Decreases in Investment Volume by Investor Category～Of all the investor categories thosesurveyed said that they expected Foreign

Fig.11: Increases and Decreases in Investment Volume
by Investor Category

Institutional Investors (42 votes) would
increase

theirinvestment

Othersvolume,followed by Domestic Pension Funds
and Foreign Pension Funds each with 22
votes, and Domestic Corporations with
20 votes. On the other hand, Domestic

Fund of funds
Sovereign funds
Foreign high net worth
Foreign institutional
Foreign pension funds
Domestic high net worth
Domestic corporations

Major Banks and Regional Banks wereDomestic other institutional banks

expected to decrease their investment

Domestic regional banks

volume. These received 25 and 22 votes,

Domestic union financial

respectively.

Domestic pension funds

Domestic major banks

The results were almost the same as
those in the January 2011 survey. A

0Increase n=205（Respondents 65）

10

20

30

40

Decrease n=109（Respondents 51）

substantial number of fund managers
believe that due to the BIS Capital Adequacy Requirements, domestic banks are reducing, and will continue toreduce investments. A significant number of managers also expected that foreign investors, Domestic Pension
Funds and Domestic Corporations would play key roles in the future.

6

50

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August 26 2011

NEWS RELEASE～Expectation of Cash Inflow from Investors by Region～
Managers’ expectations of cash inflow from foreign investors slightly weakened in the July 2011 survey fromthe January 2011 survey. With respect to investments from investors in Europe and North America, theexpectation of “Slightly decrease” rose to around 35% in the July 2011 survey from around 10% in the January
2011, representing managers’ expectations of declining investments from western countries. For Australia, theexpectation of “Slightly increase” decreased from 27% to 15%, while the sum of “Slightly decrease” and“Decrease” increased to 23% from 5%. As for Asia excluding China, the sum of “Increase” and “Slightly
increase” accounted for 96% in the January 2011 survey, which decreased to 63% in the July 2011 survey.
Meanwhile, the expectation of “Increase” from China declined, while “Slightly increase” increased. This
indicated changes in managers’ expectations that, although funds were expected to continue to flow in from China,
the rate of the increase was contracting. Expectations about the Middle East did not change noticeably.
Fig.12: Expectation of Cash Inflow from Investors by Region【January 2011survey】
Asia excl. China(n=25)

21%

Australia(n=23)

75%

27%

China
(n=25)
Middle East
(n=21)

68%

42%

5%

42%

35%

Europe(n=24) 4%
North America(n=24)

4%
0%

Increase【July 2011 survey】

26%

26%

57%

20%

40%

Slightly increase

Unchanged

60%

Asia excl. China(n=35)

5%

Australia(n=27)
China(n=33)

17%

55%

61%

4%

80%

Slightly decrease

6%

57%

15%

23%

9%

Europe(n=34)

21%

13%

North America(n=34)

0%

27%

63%

38%

38%
20%

Slightly increase

4%

3% 3%

7% 7%

38%

26%

Increase

9%

19%

61%

Middle East
(n=30)

Decrease

63%

6%

5%

100%

29%

32%

40%

60%

Unchanged

Slightly decrease

80%

3%

3%
100%
Decrease～Reason for Foreign Investors Moving into / Not Investing in the Japanese Real Estate Market～
With regard to the reasons for investors moving into the Japanese real estate market, “Allocation as part of the
global portfolio” accounted for 22%, this was followed by 18% for “The size of the real estate market is large.”
and 16% for a“Relatively attractive due to the yield gap”. The top two reasons were the same as those in theJanuary 2011 survey.
Fig.13: Reason for Foreign Investors Moving into the Japanese Real Estate Market
n=139（Respondents39）

5% 1%
8%

Allocation as part of the global portfolio

22%

The size of the real estate market is large

9%

Relatively attractive due to the yield gap
Undervalued real estate prices offer investment opportunities

9%

Politically and economically stable

18%
12%
16%

Allocating investments in Japan, a mature market, while expanding
investments in Asia
Highly stable income
Highly transparent real estate market
Income with growth potential

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August 26 2011

Meanwhile, with respect to the reasons for investors not investing in Japan, 25% of respondents, the largest share,
answered “Lack of growth potential in GDP, consumption, population, etc.”. The next largest category, 20%,
answered “Inability to promptly end nuclear power plant problems”. It turned out that, at the time of the survey,
there were many managers who believed that the nuclear power plant problems prevented foreign investors frommaking real estate investments in Japan.
Fig.14: Reasons for Foreign Investors Not Investing in the Japanese Real Estate Market
n=123（Respondents38）

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

4% 3%

2% 1%

Inability to promptly end nuclear power plant problems

25%

7%

Lack of attractive investment opportunities
Stagnant economy since the Great East Japan Earthquake

11%

Low growth potential in income

11%

20%

Cannot embark on investment given uncertainty on the rental
market outlook
Low transparency in the real estate market
No end of the decline in real estate prices in sight

16%

OthersDeclining investment value due to a contraction in the yield gap

5) Circumstances for Acquisition and Disposition
With respect to the acquisition of properties, 40% of respondents, the largest category, answered that they sought
acquisition opportunities but ”Did not agree on prices”, this was a slight decrease from the 46% in the January
2011 survey. Meanwhile, 37% of respondents answered that they “Acquired”, this was an increase from the 25%
in the January 2011 survey. Though circumstances for acquisition remained difficult, since the gap between
expected acquisition and sales prices slightly narrowed, the number of concluded transactions was believed tohave increased. Meanwhile, considering the fact that the volume of transactions in the J-REIT market temporarily
dropped after the earthquake, the March 11 disaster appeared to have also affected acquisitions by privately
placed funds. The large number of respondents that replied “Acquired” maybe due to a number of transactions thatwere concluded before the earthquake.
With respect to the disposition of properties, 48% of respondents answered “Unchanged”, 33% of respondents
answered that the circumstances had “Improved”, and 8% answered “More severe”. With the number of managers
answering “Unchanged” exceeding that of “Improved” the results indicated that a number of managers believedthat circumstances for sale did not improve further.
Fig. 16: Circumstances for Disposition

Fig.15: Circumstances for Acquisition（Respondents65）

5%

18%

37%

（Respondents61)

8%

Had no plan to acquire8%

No opportunity was available

48%

Unchanged
Improved

Did not agree on prices

More severe in July to December 2010

Acquired

40%

3%

33%

OthersOthers
Improved significantly

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August 26 2011

6) Change in Exit Strategies
With respect to the exit options probable over the next one year, the largest share of 27% chose “Sale to the third
party other than REITs or private funds”. The answer for “Extension of investment period with refinance”
accounted for 25%, falling from 30% in the January 2011 survey. Meanwhile, “Sale to the third party private
funds” and “Sale to third party REITs” accounted for 19% each, a slight increase from the January 2010 survey.
These results showed that exit options other than refinance, such as “Sale to general business companies”, “Saleto the third party REITs”, and “Sale to the third party private funds”, were expanding.
Fig. 17: Exit Options Probable Over the Next One Year
100%

12%
22%
80%

33%

15%

40%

36%

27%

30%

25%

Sale to the third party other than REITs or
private funds

20%
60%

27%

30%

26%

40%

17%
20%

0%

30%

26%

12%
11%
4%

16%
14%
5%
8%
4%

07/12
08/07
（ ｎ =108） （ n=122)

11%
10%
4%
7%
4%
09/01
（ n=114)

6%
4%
5%
4%

Extension of investment period withrefinance

28%

27%

27%

Sale to the third party private funds
Sale to the third party REITs

19%

21%

17%

11%

13%

15%

19%

5%
2%
4%

5%
3%
3%

6%
4%
1%

5%
2%
2%

Sale to affiliate REITs

14%

Sale to the affiliate private funds
Others

09/07
10/01
10/07
11/01
11/07
（ n=113) （ n=113） （ n=150） （ n=127） （ n=165）

2. Outlook for the Market and Management
1）The Bottoming out of Rents

Fig. 18: The Bottoming out of Rents

A large number of managers believed that the9

Already hit the peakbottoming-out timing of office rents would be within

19
17

July to December 2011

one year of July 2011, with 19 managers expecting it

January to June 2012

to be the period from “July-December 2011” and 24
managers expecting it to be the period from

July to December 2012

“January-June 2012” Considering that, in the January

January to June 20132011 survey, 11 managers chose the period forSince January to June2013

bottoming out as “January-June 2011” and 26

24

9
1
2
1

9

2
3
0

managers expected it to be “July-December 2011” the

32

10

20

OfficeResidential

30

40

latest survey showed that managers’ expectation for
the timing of bottoming out moved forward by six months. Regarding the bottoming-out of rents in the residential
sector, 32, a majority of managers, expected that “rents had already begun bottoming out in the first half of 2011,”
followed by 17 managers expecting it in the period of “July-December 2011” These results suggested that amajority of managers believed that rents had already bottomed out or that they would bottom out in 2011.

9NEWS RELEASE

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August 26 20112）Forecast for Real Estate Transactions in 2011
With respect to the forecast for real estate transactions in 2011, the largest share, 35%, answered thattransactions by private funds would “Remain unchanged”, this was followed by 28% who opted for “Slightly
increase”,. For transactions by J-REITs, 32% of managers expected that transactions would “Increase slightly, “,
29% thought they would “Begin rising” and 26% said transactions would “Continue to increase”. The survey
showed that many managers expected that transactions by J-REITs would become active earlier than those by
privately placed funds.
Fig.19: Transactions by Privately Placed Funds

Fig.20: Transactions by J-REITs（Respondents69）

10%
7%

Turn on the increase28%（Respondents69）

4%

20%

29%

26%

Turn on the increase

Remain unchanged

Remain unchanged

Slightly increase

Slightly increase

Continues to increase

Continues to increase

Decline9%

Decline35%32%3）Investment Strategies of Managers～Target Sectors and Areas～
With respect to the target property sector for investment, the share of “Office” decreased, while those of“Logistics” and “Hotel” increased slightly from the January 2011 survey. This appears to have reflected the factthat certain investors reduced the share of their investments in offices since offices often attracted too manybuyers, resulting in strong competition for acquiring them. The share of offices, however, still accounts for 33%,
one-third of overall investments. In terms of area, the share of the “Tokyo central 5 wards” remained almost
unchanged from the January 2011 survey. Meanwhile, the shares of “Tokyo 23 wards” and “Tokyo metropolitanarea” declined, but that of the “Kinki area,” “Nagoya area” and “Others (mainly Fukuoka Prefecture)” increased.
The results of the latest survey suggested that managers began to choose quality properties even in Tokyo and theTokyo metropolitan area. It also appeared that trading activities were still limited and some investors began
targeting properties in regional areas.
Fig. 21: Target Property Types
100%
90%
80%

4%
4%
17%

70%

1%
13%

11%

10%

7%
10%

20%

60%
50%

20%

14%
15%
22%

41%
26%

40%

20%

2%
5%
11%

1%
4%
8%

8%

16%

30%

31%

Fig. 22: Target Areas
1%
4%
11%
21%

1%
4%
9%
15%

6%
10%

1%
8%
13%

17%
18%

29%
27%

28%
27%

13%

10%

8%

90%
80%
70%
60%

21%

30%

33%

36%

44%

40%

36%

41%

38%

33%

20%
10%
0%

0%

Apartment

RetailLogistics

Hotel

18%
4%

11%

2%
7%
6%
10%

4%
3%
7%
11%

29%

28%

1%
4%
3%
13%

2%
2%
5%
14%

29%

30%

3%
2%
6%
17%

12%
24%

18%
15%

32%

9%

11%

7%
5%
10%
14%

32%

23%

23%

25%
25%

5%
21%

14%
8%

46%

48%

33%

50%

47%

40%

41%

11%
4%

04/12 05/12 06/12 07/12 09/01 09/07 10/01 10/07 11/01 11/07(n=38) (n=51) (n=55) (n=98) (n=89) (n=107) (n=98) (n=131) (n=121) (n=148)

04/12 05/12 06/12 07/12 09/01 09/07 10/01 10/07 11/01 11/07(n=46) (n=69) (n=61) (n=96) (n=87) (n=123) (n=119) (n=140) (n=138) (n=158)
Office

25%

13%

30%
33%

2%
8%

50%
40%

30%
20%

100%

Central 5 wards of Tokyo
Kinki area
Nationwide

Others10

23 wards of Tokyo
Nagoya area
OthersTokyo metropolitan area
Local cities

NEWS RELEASE

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August 26 20114）Necessary Changes for Improvement of Privately Placed Real Estate Fund Market
With respect to changes necessary for the improvement of the privately placed funds market, the answer to“Recovery of the real estate rental market” was most commonly chosen among all surveys from July 2010 to July
2011. The number of managers answering to “Inflow of global investment money” has also increased since theJuly 2010 survey. However, in the July 2011 survey, the second most common answer was “Ending of the nuclear
power plant problems to a certain extent.” A number of managers anticipate investments from foreign investors.
The latest survey showed that the nuclear power plant problems that were discouraging such foreign investments
need to end as soon as possible. Meanwhile, while the largest number of managers, 46, selected “Improvement in
the debt financing environment” in the January 2010 survey, only 11 selected the same in the July 2011 survey.
This suggested many managers thought that the debt financing environment had improved to such a level that itwas no longer an issue needing to be addressed.
Fig.23: Necessary Changes for Improvement of Privately Placed Real Estate Fund Market
n=277 （Respondents69）
Recovery of the real estate rental market

46

Ending of the nuclear power plant problems to a certain extent

38

Inflow of global investment money

33

Increase in the volume of real estate transactions

31

Sale of distressed properties on the market

31

Recovery of the J‐REIT market

29

Recovery from the recession caused by the Great East Japan Earthquake

23

Relaxation of regulations by the government

21

Improvement in the debt financing environment

11

Development of new products such as open‐ended funds

9Development of investment indexes

3

Others

2
0

10

20

30

40

50

5）Effects of the Great East Japan Earthquake
With respect to the future effects of the Great East Japan Earthquake on the privately placed real estate funds
business, 81% of managers answered that the impact was limited. In line with these results, 78% answered that
there were no major changes with regards to the question of investment policies or investment judgment standards
being revised after the earthquake.
As reasons for answering the “Impact was limited” and “No particular impact,” the largest number of managers
selected “Damage to buildings in the investment areas was limited,” followed by “Economic damage wastemporary” and “Foreign investors have a strong investment appetite for real estate in Japan over the long term.”
Meanwhile, the survey showed some managers, albeit few, with concerns about a stagnant economic recovery inJapan and trends of foreign investors avoiding investment in Japan, which would have a serious impact on futurebusiness.

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August 26 2011

Fig.24: What was the Impact of theGreat East Japan Earthquake?

Fig.25: Which Property Types have had
their Strategies Revised?
（Respondents45）（Respondents69）

6% 4%

2%
6% 2%

9%
Have a serious impact

No major changes in any
property types
Office6%6%Impact was limited

RetailNo particular impact

Hotel
Residential

Don’t know

78%

Logistics

81%

Fig.26: Reasons for “Impact was limited” and “No particular impact”
n=119（Respondents60）

3%2% 2%
3%
4%

Damage to buildings in investment areas was limited

34%

Economic damage was temporary
Foreign investors have strong investment appetite for real estate inJapan over the long‐term
Voluntary restraint to consumption is a temporary trend

24%

The scope of voluntary restraint is limited

29%

Purchase of J‐REITs by the Bank of Japan will support the real estate
investment market
The impact of the Great Hanshin Awaji Earthquake was temporary
Others6）Fund Manager’s Activity of Management Business Targeting Overseas Real EstateWith respect to the question of fund manager’s activity of management businesses targeting overseas real estate,
61% of managers said that they had “No plans now or in the future.” On the other hand, in addition to 12% ofmanagers who had already made overseas investments, 24% responded that they were “Currently investigating.”
The number of managers engaged in overseas investments is likely to increase in the future. Among targetedcountries, China received the largest votes, 22%, followed by Singapore, the United Kingdom and the UnitedStates.
Fig.27: Fund Manager’s Activity of Management
Business Targeting Overseas Real EstateFig.28: Target Countries
n=68（Respondents24）

12%（Respondents66）

3%

4%

3% 3%

3%
22%

6%

No plans now or in the future

6%
Currently investigating

7%

24%

13%

Have launched

7%

61%

Have a plan to launch

12%

12

13%

China
Singapore
United Kingdom
United States
Hong Kong
Germany
Australia
Korea
FranceOther Asian
Other European
OthersNEWS RELEASE

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August 26 2011

7) Managers’ Requirements for Future Growth and Sustainability of their Businesses
The most frequent answer to the question about requirements for the future growth and sustainability of theirbusiness was “Improving property-acquisition abilities,” which rose in ranking from the January 2011 survey. The
number of managers selecting “Improving equity-raising abilities” was more than double compared to the January
2011 survey. These results indicate increasing difficulties in acquiring investment grade properties and in
equity-raising. Meanwhile, “Improving asset management abilities” and “Management strategy and its
accountability,” which were ranked as the two most common items in the July 2010 and January 2011 survey,
continued to attract a large number of managers in the latest survey.
Fig.29: Managers’ Requirements for Future Growth and Sustainability of their Businesses
39

Enhancement of capabilities to acquire properties

38

Enhancement of AM capabilities

32

Enhancement of equity raising capabilities

28

Management strategy and its accountability

18

Enhancement of relations with investors

17

Enhancing the ability to handle foreign investors

11

Reinforcement of compliance structure

10Competence in special expertise

9

Enhancement of debt financing capabilities

7

Enhancement of corporate strength
Reinforcement of information disclosure

6

Development of new products such as open‐ended funds

6
4

Enhancement of research capabilities

2

Expansion of foreign real estate fund that targets businesses
Building a bad debt investment system

1

Others10July 11（n=229

510Respondents 69）

15

20

25

Jan 11（n=196 Respondents 63）

13

30

35

40

45

NEWS RELEASE

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August 26 2011

Definitions of Terms
The definitions of terms used in this report are as follows;
Privately placed real estate fund： The privately placed real estate fund is a structure under which investors’ funds are managed byprofessional investment managers. In this report, commingled funds that are designed for
multiple investors, and separate accounts, investment programs for single investors are bothcategorized as privately placed funds. This does not include products governed by the Act
Concerning Designated Real Estate Joint Enterprises.
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 thelaunch of the fund, leaving additional investments after the launch usually at the discretion ofmanager 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 thefund, and properties are acquired after the launch at the discretion of a manager subject topre-determined investment guidelines; Also called a blind pool type

Closed-ended fund:This refers to privately placed real estate funds with stipulations on the management period.

Open-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 valueof the holding is calculated based on the appraisal value at the time.

＜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 andcapital 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

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.

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

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August 26 2011

Contact:

STB Research Institute Co., Ltd.
3F Kamiyacho Central Place. 4-3-13, Toranomon, Minato-ku, Tokyo
105-0001, Japan
https://www.stbri.co.jp/english/contact/form-private/private_investment.html
http://www.stbri.co.jp/

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