Market consultation

FTSE Russell consultation on theindex eligibility of J-REITs

ftserussell.com

May 2019

FTSE Russell consultationon the index eligibility of J-REITs
Introduction
Japanese Real Estate Investment Trusts (J-REITs) have been listed on the Tokyo Stock Exchange since
September 2001. However, they are currently considered ineligible for the FTSE Global Equity Index Series(GEIS).
Under Japanese Investment Trust Law, J-REITs are structured as either investment trusts or investment
corporations, with Japanese investors considering them to be an alternative asset class rather than an equityinvestment instrument.
Japanese Investment Trust Law requires J-REITs to outsource all administrative and asset management
services to external parties and hence their investment aim and structure do not meet the key criterion to beconsidered to be a company under the Japan Company Law as they have no employees. Japan Company
Law distinguishes between ‘real’ companies that have employees and produce products, and ‘paper’
companies and those institutions whose main business is investing. Hence, J-REITs are treated as funds
rather than companies.
J-REITs are not included in the first or second sections of the Tokyo Stock Exchange, are not components ofeither the Nikkei 225 Index or the TOPIX Index and J-REITs cannot be used as the basis for Japanesederivatives (e.g. futures and options).
As stated above, FTSE Russell currently excludes J-REITs from the FTSE Global Equity Index Series.
However, they are eligible for inclusion in the FTSE EPRA Nareit Global Real Estate Index Series. The
results of this consultation will not impact the continuing index eligibility of J-REITs for the FTSE EPRA
Nareit Global Real Estate Index Series.
The purpose of this consultation is to invite index users and other stakeholders to provide feedback as towhether the J-REIT definition under Japanese law constitutes as grounds to continue their exclusion fromthe FTSE Global Equity Index Series.
A summary of the anonymised responses will be considered at the June meetings of the FTSE Russell
Regional Equity Advisory Committees and an update on FTSE Russell’s proposed approach will be
communicated by the end of September 2019.

FTSE Russell | FTSE Russell Consultation on the index eligibility of J-REITs

2Responding to the Consultation
The proposals set out in this consultation document are included in order to gather feedback andmay or may not result in changes to our indexes or data solutions.
Please submit your response to the questions included in this consultation online athttps://www.surveymonkey.com/r/T2MNZBRAll responses will be treated as confidential. FTSE Russell may publish a summary of theconsultation results, but no individual responses will be published and no respondents will be named.
If you have any questions about this survey, or if you encounter any technical issues, please contact
rpawson@ftserusssell.com.

FTSE Russell | FTSE Russell Consultation on the index eligibility of J-REITs

3Analysis
As of 31 December 2018, there were 61 listed J-REITs on the Tokyo Stock Exchange.
For index eligibility purposes, J-REITs would be reviewed as part of the FTSE Global Equity Index Series
Japan Regional semi-annual review. Based on data as of 31 December 2018, 50 out of the 61 securities
are projected to be eligible for possible inclusion in the FTSE Global All Cap Index (based on size andliquidity and subject to their assessment against the voting rights screen).
Table 1 illustrates the size segments of the J-REIT securities that are projected to be eligible for the FTSE
Global Equity Index Series based on data as of 31 December 2018. See Table 3 for the projected list ofnames

Table 1Size Segment

Large Cap(L)Mid Cap(M)Small Cap
(S)

Micro

Total Cap

J-REITs

21830

1161

Investable Market Cap(USD m)

15,251.14

57,811.55

32,000.20

2,424.83

107,487.72

Table 2 illustrates the projected weight in index of the 50 J-REIT securities that are projected to be eligiblefor the FTSE Global All Cap Index based on data as of 31 December 2018.

Table 2J-REITs

GlobalAll Cap(LMS)

DevelopedAll Cap(LMS)

JapanAll Cap(LMS)All World(Large/Mid)

Developed(Large/Mid)

Japan(Large/Mid)

Projected Weights

0.228%

0.253%

2.727%

0.178%

0.198%

2.091%

If, as a result of this consultation, FTSE Russell were to determine that J-REITs should be considered
eligible for index inclusion, they would be reviewed in conjunction with the March 2020 semi-annual review
For clients who prefer to continue to exclude Japanese REITs from their indexes, FTSE Russell would
launch an “ex Japan REITs” index.

FTSE Russell | FTSE Russell Consultation on the index eligibility of J-REITs

4

Table 3 illustrates the J-REIT securities that are projected to be eligible for the FTSE Global Equity IndexSeries based on data as of 31 December 2018.
Table 3Sedol

Name

Proposed Size Segment

6396800

Nippon Building Fund Inc

Large

6397580

Japan Real Estate Investment Corporation

Large

BYSJJF4

Nomura Real Estate Master FundMid6513342

Japan Retail Fund Investment

Mid6723839

United Urban Investment

Mid

B0Z6WY0Daiwa House REIT Investment

Mid

B98BC67

Nippon Prologis REIT

Mid

6527774

Orix Jreit IncMid

B8RBZV7

GLP J-REITMid

B62WZW2

Advance Residence Investment

Mid6528175

Japan Prime Realty Investment

Mid

B1530B1

Japan Hotel REIT Investment

Mid

B8BSRY1

Activia PropertiesMid

B0LNTF5

Daiwa Office Investment

Mid

B0C5Q59

Kenedix Office Investment CorporationMid

BSKRKL7

Sekisui House ReitMid

B1GF9P3

Mori Hills REIT Investment

Mid

B00STP1

Invincible Investment

Mid

B182BB2

Nippon Accommodations FundMid

BFSSCF9Aeon REIT Investment

Mid

B020QY3

Frontier Real Estate Investment

Small

BJ04C42

Hulic Reit

Small

6729558

Mori Trust Sogo REIT

Small

B07NL19

Japan Logistics Fund

Small

B15T1R2

Japan Excellent

Small

B24HH65

Industrial & Infrastructure Fund Investment

Small

B8N6QD5

Comforia Residential REIT

Small

6543800

Premier Investment Co

Small

BLC7414

Nippon REIT Investment

Small

6687203

Tokyu REIT

Small

B0LNCF6

Ichigo Office REIT Investment

Small

B76BZX3

Kenedix Residential Next Investment

Small

B19PR78

MCUBS MidCity Investment

Small

B15T1S3Japan Rental Housing Investmen

Small

B0B8154

Fukuoka REITSmall

BMBL9L9

Invesco Office J-Reit

Small

BTLX226

Kenedix Retail REIT

Small

B064LV3

Heiwa Real Estate REIT

Small

BDD1L29

LaSalle Logiport REITSmall

BYZWTW3

Mitsui Fudosan Logistics Park

Small

FTSE Russell | FTSE Russell Consultation on the index eligibility of J-REITs

5

BBH7G35

Hoshino Resorts Reit

Small

6693608

Global One Real Estate Investment

Small

B0LLJ37

Hankyu Hanshin REIT

Small

BZ1B0D9

Mirai

Small

BDFT842Mori Trust Hotel REIT

Small

BDGTL31

One REIT

Small

BF46Y06

Mitsubishi Estate Logistics REIT Investment

Small

BYYJ8J5Star Asia Investment

Small

BYRVCJ6Samty Residential Investment

Small

B0NNX17Starts Proceed Investment

Small

BVVFD01

Healthcare & Medical Investment

Micro

BYQL3F0Ichigo Hotel REIT Investment

Micro

BSKPSK6Tosei Reit Investment

Micro

BZ1KQN8

Itochu Advance Logistics Investment

Micro

BZ16GD6

Takara Leben Real Estate Investment

Micro

BD3VZL6

Sakura Sogo REIT Investment

Micro

BD0G2B3

Xymax REIT Investment

Micro

BFXZ9X2

CRE Logistics REIT

Micro

BYY57L8

Ooedo Onsen Real Estate Investment

Micro

BYZWTV2

Marimo Regional Revitalization REIT,

Micro

BRHVCD1Nippon Healthcare Investment

Micro

FTSE Russell | FTSE Russell Consultation on the index eligibility of J-REITs

6

Consultation questions
1. Should J-REITs be considered an eligible security class within the FTSE Global Equity IndexSeries and associated indexes?

☐ No
☐ Yes
☐ If “No” is selected please provide any comments in the box below
Please enter your comments here:

2. Are there any known regulatory and/or governance requirements that could restrict you frominvesting in J-REITs?

☐ No
☐ Yes
☐ If “Yes” is selected please provide any comments in the box below
Please enter your comments here:

FTSE Russell | FTSE Russell Consultation on the index eligibility of J-REITs

7

3. Are there any reasons why you would consider J-REITs to be different from REITs listed in otherjurisdictions (other than their definition under Japanese law as outlined above)?

☐ No
☐ Yes
☐ If “Yes” is selected please provide any comments in the box below
Please enter your comments here:

4. Please provide any additional comments

FTSE Russell | FTSE Russell Consultation on the index eligibility of J-REITs

8

For more information about our indexes, please visit ftserussell.com.
© 2019 London Stock Exchange Group plc and its applicable group undertakings (the “LSE Group”). The LSE Group includes (1) FTSE
International Limited (“FTSE”), (2) Frank Russell Company (“Russell”), (3) FTSE Global Debt Capital Markets Inc. and FTSE Global
Debt Capital Markets Limited (together, “FTSE Canada”), (4) MTSNext Limited (“MTSNext”), (5) Mergent, Inc. (“Mergent”), (6) FTSE
Fixed Income LLC (“FTSE FI”) and (7) The Yield Book Inc (“YB”). All rights reserved.
FTSE Russell® is a trading name of FTSE, Russell, FTSE Canada, MTSNext, Mergent, FTSE FI, YB. “FTSE®”, “Russell®”, “FTSE
Russell®”, “MTS®”, “FTSE4Good®”, “ICB®”, “Mergent®”, “The Yield Book®” and all other trademarks and service marks used herein(whether registered or unregistered) are trademarks and/or service marks owned or licensed by the applicable member of the LSEGroup or their respective licensors and are owned, or used under licence, by FTSE, Russell, MTSNext, FTSE Canada, Mergent, FTSE
FI, YB. FTSE International Limited is authorised and regulated by the Financial Conduct Authority as a benchmark administrator.
All information is provided for information purposes only. All information and data contained in this publication is obtained by the LSEGroup, from sources believed by it to be accurate and reliable. Because of the possibility of human and mechanical error as well asother factors, however, such information and data is provided "as is" without warranty of any kind. No member of the LSE Group nor
their respective directors, officers, employees, partners or licensors make any claim, prediction, warranty or representation whatsoever,expressly or impliedly, either as to the accuracy, timeliness, completeness, merchantability of any information or of results to beobtained from the use of the FTSE Russell Products or the fitness or suitability of the FTSE Russell Products for any particular purpose
to which they might be put. Any representation of historical data accessible through FTSE Russell Products is provided for information
purposes only and is not a reliable indicator of future performance.
No responsibility or liability can be accepted by any member of the LSE Group nor their respective directors, officers, employees,
partners or licensors for (a) any loss or damage in whole or in part caused by, resulting from, or relating to any error (negligent orotherwise) or other circumstance involved in procuring, collecting, compiling, interpreting, analysing, editing, transcribing, transmitting,communicating or delivering any such information or data or from use of this document or links to this document or (b) any direct,
indirect, special, consequential or incidental damages whatsoever, even if any member of the LSE Group is advised in advance of thepossibility of such damages, resulting from the use of, or inability to use, such information.
No member of the LSE Group nor their respective directors, officers, employees, partners or licensors provide investment advice andnothing contained in this document or accessible through FTSE Russell Products, including statistical data and industry reports, should
be taken as constituting financial or investment advice or a financial promotion.
Past performance is no guarantee of future results. Charts and graphs are provided for illustrative purposes only. Index returns shownmay not represent the results of the actual trading of investable assets. Certain returns shown may reflect back-tested performance. All
performance presented prior to the index inception date is back-tested performance. Back-tested performance is not actualperformance, but is hypothetical. The back-test calculations are based on the same methodology that was in effect when the index wasofficially launched. However, back- tested data may reflect the application of the index methodology with the benefit of hindsight, andthe historic calculations of an index may change from month to month based on revisions to the underlying economic data used in thecalculation of the index.
This publication may contain forward-looking assessments. These are based upon a number of assumptions concerning future
conditions that ultimately may prove to be inaccurate. Such forward-looking assessments are subject to risks and uncertainties and may
be affected by various factors that may cause actual results to differ materially. No member of the LSE Group nor their licensors
assume any duty to and do not undertake to update forward-looking assessments.
No part of this information may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic,mechanical, photocopying, recording or otherwise, without prior written permission of the applicable member of the LSE Group. Use anddistribution of the LSE Group data requires a licence from FTSE, Russell, FTSE Canada, MTSNext, Mergent, FTSE FI, YB and/or theirrespective licensors.

FTSE Russell

9About FTSE Russell
FTSE Russell is a leading global index provider creating and managing awide range of indexes, data and analytic solutions to meet client needs
across asset classes, style and strategies. Covering 98% of the investable
market, FTSE Russell indexes offer a true picture of global markets,
combined with the specialist knowledge gained from developing local
benchmarks around the world.
FTSE Russell index expertise and products are used extensively byinstitutional and retail investors globally. For over 30 years, leading assetowners, asset managers, ETF providers and investment banks havechosen FTSE Russell indexes to benchmark their investment performanceand create investment funds, ETFs, structured products and index-based
derivatives. FTSE Russell indexes also provide clients with tools for asset
allocation, investment strategy analysis and risk management.
A core set of universal principles guides FTSE Russell index design andmanagement: a transparent rules-based methodology is informed byindependent committees of leading market participants. FTSE Russell isfocused on index innovation and customer partnership applying the highest
industry standards and embracing the IOSCO Principles. FTSE Russell iswholly owned by London Stock Exchange Group.
For more information, visit ftserussell.com.

To learn more, visit ftserussell.com; email info@ftserussell.com; or call your regional
Client Service Team office:EMEA+44 (0) 20 7866 1810

FTSE Russell

North America+1 877 503 6437

Asia-PacificHong Kong +852 2164 3333
Tokyo +81 3 4563 6346
Sydney +61 (0) 2 8823 3521

10