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Investors bet on Japanese REITs

TOKYO — Yield-hungry investors have been betting that Japanese real estate investment trusts, including the Singapore-sponsored GLP J-REIT, will pay off as asset prices rise and interest rates remain stable.

TOKYO — Yield-hungry investors have been betting that Japanese real estate investment trusts, including the Singapore-sponsored GLP J-REIT, will pay off as asset prices rise and interest rates remain stable.

The Tokyo Stock Exchange REIT Index has risen around 3 per cent so far this year to a 13-month high this month, helped by the introduction in January of the Nippon Individual Savings Account. The tax-break facility was set up to give Japanese retail investors incentive to move their funds to other assets from historically low-earning savings accounts, whose cash value erodes as the Bank of Japan slowly moves closer to meeting its 2 per cent inflation target.

“People have started realising inflation is really coming,” said Mr Kyoya Okazawa, head of global equities and commodity derivatives at BNP Paribas in Tokyo, to explain the appeal of REITs. “I think it’s an inflation hedge. This kind of fear is pushing some money into higher-yielding assets instead of just bank deposits.”

Listed REITs are similar to stock mutual funds in that they are shares of a portfolio of properties and trade on exchanges, with dividend yields derived from rental income.

The REIT index’s return of 3.8 per cent based on forward dividend projections dwarfs the 10-year Japanese government bond yield of around 0.6 per cent. It is also well above the benchmark United States 10-year yield, which closed at 2.64 per cent in New York on Wednesday.

Mr Toru Ibayashi, executive director at UBS Wealth Management, said GLP J-REIT, which operates logistics facilities, has growth potential as e-commerce transactions rise in Japan. As of April 1, GLP J-REIT, sponsored by Singapore-listed GLP, has 44 properties with a leasable area of 1.49 million sqm in its Japanese portfolio worth more than ¥285 billion (S$3.48 billion). The properties are 99.9 per cent occupied.

Mr Ibayashi also sees value in second-tier REITs owning office buildings in less pricey Tokyo neighbourhoods or outside the capital as they offer more upside potential. These include Orix JReit, which invests in buildings in Tokyo areas such as Shinagawa and Shinjuku, and Mid Reit, which invests in Osaka office buildings. AGENCIES

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