Japan REITs Seeking Mergers

Tokyo, Aug. 3 (Jiji Press)--Japanese real estate investment trust
fund operators are starting to seek mergers, in an effort to strengthen
their management bases at a time when trading has remained sluggish amid the
real estate market slump.
While the government has implemented a tax revision to facilitate
REIT mergers, the real estate industry is also stepping up efforts to
promote such moves.
In July, Daiwa House Industry Co. <1925> expressed its intention to
merge its affiliated REIT operator, BLife Investment Corp. <8984>, and New
City Residence Investment Corp., which filed for court protection under the
civil rehabilitation law last October to become the first Japanese REIT
operator to go bust.
Major trader Itochu Corp. <8001> is in talks on integrating
affiliated Advance Residence Investment Corp. and failed REIT operator
Nippon Residential Investment Corp. in autumn this year.
REIT operators buy office buildings and other properties with funds
collected from investors and pay out dividends using income from rents and
other profits from the properties.
Currently, 40 REITs are trading on the Tokyo Stock Exchange and one
on the Jasdaq Securities Exchange.
Amid the global financial crisis that deepened in autumn last year,
fund raising has become difficult for REIT operators with low credibility.
REITs now have a huge influence on the real estate market as assets
held under them total over 7 trillion yen. If cash-strapped REIT operators
sell properties at low prices, the real estate market could fall further, an
industry official said.
Another industry official said that REIT mergers are necessary to
revitalize the market, predicting that there will be a series of
acquisitions of REIT operators with low credibility by stronger competitors.
END