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Overview of the market
From the late 1990s, the Japanese market saw an increase in real estate investment, adopting more modern investment methodologies and techniques, including non-recourse loans, commercial mortgage-backed securities, residential mortgage-backed securities and the use of other securitisation and structured finance vehicles, and market participants included not only Japanese real estate companies and financial institutions, but also Wall Street-style foreign investment banks and other investment firms. Non-recourse investment in real estate and other Wall Street-oriented model investments and loans rapidly increased until the market became sluggish in the latter half of 2007 and declined sharply in 2008 because of the global financial crisis. Some years of stagnation in the economy followed, but beginning with the December 2012 re-election of Shinzo Abe as prime minister, the Japanese real estate investment environment significantly improved under a series of economic measures adopted by the former Abe administration, popularly referred to as Abenomics. The awarding of the 2020 Olympic Games to Tokyo in 2013 also contributed to the overall increase in real estate investment in Japan. The depreciation of the yen additionally encouraged increased investment of foreign capital in Japanese real estate. More recently, while the covid-19 pandemic has had an impact on many Japanese business sectors as it has had globally, the Japanese real estate investment market has held up well, with no significant decline in transaction volume compared with other countries.
In terms of market players, major public real estate companies domiciled in Japan, such as Mitsubishi Estate Co Ltd, Mitsui Fudosan Co Ltd and Nomura Real Estate Holdings Inc, tend to hold significant assets and possess strengths in the development, management and operation of real estate; many have subsidiaries that are asset management companies (AMCs) of Japanese real estate investment trusts (J-REITs). Apart from these companies, there is another class of public real estate company in Japan, which is characteristic in the Japanese market: they belong to non-government owned railway company groups, such as the Tokyu Group, Hankyu Hanshin Toho Group and Kintetsu Group – historically, the development of railways and surrounding areas has created synergies between the real estate business and the railway business, especially when the Japanese economy experienced high economic growth after World War II. However, a number of these companies, faced with a decline in operating revenues because of covid-19, are seeking to sell their real estate in order to secure funds for future growth. For example, in October 2021, the Kintetsu Group sold eight hotels owned by its subsidiaries to an investment fund managed by Blackstone Inc, a US asset management firm (Blackstone). In addition, Seibu Holdings announced in April 2022 that it has signed a letter of intent to sell its domestic hotel and leisure assets to GIC, a Singaporean sovereign wealth fund; and Odakyu Electric Railway Co, Ltd is in the process of selling the Hyatt Regency Tokyo, a hotel in Tokyo, to an investment fund managed by KKR & Co Inc, a US asset management firm (KKR).
Another key driver in Japan’s real estate investment market is J-REITs. The J-REIT market was established in September 2001, when two J-REITs publicly listed their investment units on the Tokyo Stock Exchange (TSE) for the first time. Since then, REITs have become popular in Japan among investors as a moderate-risk product with stable returns. As of the end of March 2021, Japan is the second-largest listed REIT market in the world, after the United States; and as of the end of April 2022, 61 publicly listed REITs are operating, with a total market capitalisation of approximately ¥16.3 trillion, having total assets under management of approximately ¥21.3 trillion. This exceeds the total market capitalisation of the 75 public real estate companies listed on the First Section of the TSE2 (approximately ¥14 trillion) as of the end of March 2022.
When established, J-REITs are generally structured on the assumption that they will be listed in the future. However, since the creation of Japan’s first private REIT in 2010, the market for this instrument has expanded to meet the needs of investors looking for long-term, stable investments. Private real estate funds that do not take the form of J-REITs are also active in Japan.
In addition, investors’ interest in investing in Japanese infrastructure projects has been growing, as infrastructure also is considered to be a stable asset class that is less susceptible to economic trends as well to provide diversification from an asset management perspective. In response to this increased interest, the TSE established an infrastructure fund market on 30 April 2015 on which funds that invest in infrastructure assets, including renewable energy facilities, power grids and transport and transmission networks, are listed. As of the end of April 2022, seven publicly listed infrastructure funds are operating, with a total market capitalisation of approximately ¥١٧٠ billion.
Recent market activity
Some of the most significant recent real estate transactions are described below.
In April 2020, Japan Rental Housing Investment Corporation, having Daiwa Securities Group Inc as sponsor, implemented an absorption-type merger, with Japan Healthcare Investment Corporation as the absorbed corporation. This transaction sought to expand the asset size, obtain stability of proceeds and disperse the risk of the combined entities in a complementary way.
More recently, in March 2021, Japan Retail Fund Investment Corporation (JRF) and MCUBS MidCity Investment Corporation (MMI), both having Mitsubishi Corp-UBS Realty Inc as sponsor, implemented an absorption-type merger, with JRF as the surviving corporation and MMI as the absorbed corporation.
In November 2020, Sumitomo Mitsui Finance & Leasing Co Ltd (SMFL) announced that a fund, investing through one of its subsidiaries, acquired 70 per cent of the shares of Kenedix Inc (Kenedix)3 through a share tender offer (or takeover bid (TOB)) for about ¥120 billion. The remaining shares of Kenedix will continue to be held by ARA Asset Management Limited (ARA),4 which was the largest shareholder of Kenedix before the tender offer deal. This is because, as a result of discussions between SMFL and ARA, it was determined that maintaining a strategic capital relationship between Kenedix and ARA would further enhance the effect of Kenedix’s going private through the TOB and would contribute to the enhancement of Kenedix Group’s corporate value over the medium to long term.
In March 2022, KKR announced that one of its subsidiaries acquired all of the shares of Mitsubishi Corp-UBS Realty Inc, which is the AMC of Japan Metropolitan Fund Investment Corporation and Industrial & Infrastructure Fund Investment Corporation (in addition to being the sponsor of JRF and MMI, as noted above). This entity had been formed and owned by Mitsubishi Corporation and UBS Asset Management.
In February 2022, ITOCHU Corporation announced that one of its affiliates, AD Investment Management Co Ltd (ADIM), will implement an absorption-type merger, with ADIM as the surviving corporation and ITOCHU Advance Logistics Investment Corporation as the absorbed corporation, with the effective date being 1 June 2022.
Real estate companies and firms
Public real estate companies in Japan are formed as companies (KKs) under the Companies Act of Japan. There were 75 public real estate companies listed on the First Section of the TSE at the end of March 2022, of which Mitsubishi Estate Co Ltd has the largest market capitalisation of approximately ¥2.3 trillion.
As previously noted, J-REITs are a type of investment fund, and they are formed under the Act on Investment Trusts and Investment Corporations of Japan (Investment Trust Act). A J-REIT, which invests in and manages real estate assets, uses investors’ funds to purchase real estate assets, in return for which investors receive investment units. The investment units of a J-REIT can be listed and traded on a stock exchange. Under the Investment Trust Act, there are two types of legal structure for J-REITs: investment corporations and contractual investment trusts. At the time of writing, all J-REITs with investment units listed on Japanese stock exchanges have been structured as investment corporations.
There are 61 publicly traded J-REITs currently listed on Japanese stock exchanges, of which Nippon Building Fund Inc has the largest market capitalisation of approximately ¥1.1 trillion and a total asset acquisition price of approximately ¥1.4 trillion.
Since an investment corporation is statutorily designed only to be an investment vehicle, the Investment Trust Act does not permit the vehicle to hire employees. Consequently, an investment corporation is required to outsource most of its business operations to external service providers. For example, the investment management function must be outsourced to an AMC registered under the Financial Instruments and Exchange Act of Japan (FIEA). In addition, all J-REITs also have one or more sponsors, although this is not a legal requirement. A sponsor typically acts as a promoter for the establishment of the AMC, which in turn acts as a promoter for the establishment of the investment corporation to which it provides asset management services. The sponsor also acts as a main supplier of properties to the J-REIT. While adopting this REIT structure under the Investment Trust Act has its benefits in attracting investors and raising funds (for example, because it is a specifically designed structure for investment purposes, certain mechanisms to protect investors’ interests are statutorily mandated), there is a long-standing theoretical concern over potential conflicts of interest between those of sponsors and those of unitholders. To address this concern, the Investment Trust Act was amended in 2013 to require an AMC to obtain prior consent from an investment corporation (based on the approval of its board of officers) before certain significant transactions between the investment corporation and interested parties of the AMC (such as the sponsor) are carried out.
The governance structure of a J-REIT formed as an investment corporation consists of the unitholders’ meeting,5 a board of officers formed by its corporate officers and supervisory officers,6 and an accounting auditor. Since, as previously mentioned, all investment decisions taken by an investment corporation are meant to be taken by its AMC, in practice, the principal responsibility of corporate officers of a J-REIT is to supervise the AMC.
To be listed on a stock exchange, a REIT must meet various criteria, including the following:
An investment corporation is effectively a collective investment vehicle and is essentially a conduit for the distribution of profits. Therefore, unlike an ordinary corporation, an investment corporation is permitted to deduct distributions paid by it to its unitholders from its taxable income for Japanese corporate tax purposes, subject to certain requirements under the Act on Special Measures Concerning Taxation of Japan. These requirements are often referred to as ‘conduit requirements’ and include:
The primary asset classes of REIT investments include offices and residential and commercial facilities. In addition, logistics facilities have increased as a REIT asset-class focus in recent years.
Furthermore, in light of the ageing population of Japan, the government is looking to expand the number and availability of nursing services and hospitals, and issued guidelines for nursing facilities (in June 2014) and for medical facilities (in June 2015). In November 2014, the first REIT investing only in healthcare facilities and related real estate listed its investment units on the TSE. Currently, there is only one healthcare REIT listed on the TSE.
While it may be rather common for US-based investment management firms, such as KKR and Blackstone, to also manage vehicles making and holding real estate investments, Japanese-domiciled investment firms’ specialisations tend to be divided, as real estate fund managers in Japan do not usually act alongside private equity investors investing in various industry and company sectors within a large alternative asset management firm.
The most popular structures and investment vehicles used for real estate investments in Japan by real estate investment funds are the GK-TK structure and the TMK structure.
Typically, a limited liability company (GK) under the Companies Act acts as a special purpose company and holds an investment portfolio, and investors invest in the GK through a silent partnership (TK) agreement. Funds from the investors are pooled, and the asset manager has partial discretion to invest in unspecified real estate assets, with the real estate securities and earnings being distributed to investors. A TK arrangement qualifies for favourable tax treatment if the TK investor is a passive investor with minimal control over the management of the GK and the funds contributed under the TK arrangement. This tax-efficient combination of a GK and TK arrangement is called the GK-TK structure.
A TMK incorporated under the Law Concerning Asset Liquidation of Japan is another type of corporate entity often used as a real estate investment vehicle. A TMK may only be used to liquidate or securitise certain assets. This type of investment platform is used to make investments in real estate, trust beneficial interests in real estate and loans, and TMK bonds that are backed by real estate. A TMK is typically funded by issuing TMK bonds and preferred shares that meet certain tax qualifications required for the TMK to receive preferential tax treatment. If a TMK, its bonds and its preferred shares are properly structured, and the TMK meets certain other requirements under the Corporate Tax Act of Japan, it is permitted to deduct all distributions to preferred shareholders from its taxable profits in addition to deducting debt payments.
Transactions
Since M&A transactions of real estate companies are essentially the same as those of ordinary companies with the same applicable laws and regulations,7 this section will focus on the legal framework and deal structure of M&A transactions concerning J-REITs.
M&A transactions concerning J-REITs are conducted primarily as a growth strategy for an existing REIT or as a means of entering into the J-REIT market by a prospective sponsor. In addition, in recent years, there have also been scattered acquisitions by foreign funds targeting prime Japanese real estate.
There are few methods available for REIT M&A transactions, as not all of the structures available for M&A transactions concerning ordinary corporations under the Companies Act are provided for in the Investment Trust Act, and are therefore not permitted in the context of J-REIT M&A transactions. For example, with respect to investment corporations, the Investment Trust Act does not provide for the transfer of all or a substantial part of the business of a company, company split, share exchange or share transfer – all of which are available to ordinary stock companies.
Two transaction forms are, however, thought to be feasible for the purpose of J-REIT M&A transactions: the acquisition of the shares of an AMC (sometimes combined with acquisition of units of the investment corporation); and the merger of two or more investment corporations.8
If an acquirer wishes to obtain control of a REIT’s investment management function, acquiring the shares of the existing AMC managing that REIT’s assets is the simplest and – in most cases – most efficient way of doing this, since it is not easy for the REIT’s unitholders to replace the existing AMC with another AMC. The shares of the AMC are acquired or transferred for the purpose of replacing a sponsor or having a new sponsor participate in addition to the existing sponsor or sponsors.
The acquisition of an AMC’s shares is sometimes accompanied by the acquisition of the units of an investment corporation. An investor may acquire units either by subscribing for new units to be issued or by acquiring existing units through market transactions or TOBs; all or most of the units would be acquired by subscribing for new units if the investment corporation needs additional funds. It is common for the new sponsor and its group companies to acquire, in total, less than 50 per cent of the aggregate outstanding units of the investment corporation to comply with the tax conduit requirements. The acquisition of units of the investment corporation must comply with the FIEA regulations, including the TOB regulations. As such, in the event that an acquirer wishes to gain control over one-third of the units of a REIT without purchasing units on the stock exchange on which it is listed, the acquirer must utilise the TOB procedures prescribed in the FIEA. In light of the fiduciary duties owed by each officer to the investment corporation, it is understood that the board of officers must take into consideration not only the price offered but also other critical factors, including continued listing on the exchange, compliance with the tax conduit requirements and sufficient protection of the interests of minority unitholders. If the officers of the investment corporation are to be changed in conjunction with the acquisition of shares of the AMC, the change must be approved at a unitholders’ meeting by a majority vote. In addition, various transactions often take place to establish the new sponsor’s control, which include changes in the directors of the AMC, the execution of a sponsor support agreement, and amendments to the investment policy and other basic structures of the REIT or the AMC (or both). At the same time, the new sponsor often sells properties owned by it to the REIT.
In the event that shares of the AMC are acquired for the participation of a new sponsor in addition to the existing sponsors, the additional sponsor often acquires a minority interest in the AMC without acquiring units of the investment corporation. When the additional sponsor becomes a shareholder of the AMC, it is common practice for the current sponsors and the additional sponsor to enter into a shareholders’ agreement for the purpose of coordinating their interests.
Incidentally, as most if not all AMCs of existing J-REITs are non-public unlisted companies, the hostile takeover of an AMC is virtually impossible; and as an AMC’s articles of incorporation ordinarily contain a provision requiring that transfers of any of its shares be approved by the board of directors, the shares of an AMC cannot be acquired without the agreement of the AMC’s current shareholders and the approval of its board of directors.
There are two types of merger for REITs:
The consideration for the merger is basically limited to the units of the surviving REIT under the Investment Trust Act. However, cash payments in mergers for certain purposes, such as adjustment of fractions, are allowed under the Investment Trust Act.
A REIT can only merge with another REIT: it cannot merge with a joint-stock company or any other corporation or entity other than a REIT. Incorporation-type mergers are less common than absorption-type mergers for various reasons, including the more complicated procedures involved in incorporation-type mergers. For this reason, the rest of this section will only cover matters related to absorption-type mergers.
The procedures for mergers of investment corporations are essentially the same as those for companies under the Companies Act. Under the Investment Trust Act, parties must enter into a written merger agreement on the fundamental terms and conditions of the contemplated merger. The merger must generally be approved by the board of officers at the board meeting and by the unitholders at the unitholders’ meeting of both merging REITs. At the unitholders’ meeting, a vote by two-thirds or more of the investment units present at the meeting is required, and the quorum for the meeting must be a majority of the total number of issued and outstanding units. In the case of an absorption-type merger, however, unitholder approval is not required from the surviving REIT if the total number of investment units delivered from the surviving REIT to the dissolving REIT’s unitholders as consideration for the merger does not exceed one-fifth of the total number of investment units of the surviving REIT (a short-form merger).
Moreover, certain disclosure procedures and creditor protection procedures set forth in the Investment Trust Act must be followed. A dissenting unitholder may demand that the investment corporation purchase its units at a fair value. However, in the case of a short-form merger, dissenting unitholders of the surviving investment corporation may not demand that their units be purchased, unlike in the mergers of companies.
In addition, external service providers to which the surviving REIT will outsource its functions following the merger (such as an AMC) must be selected. For this purpose, the asset management agreement with the AMC not selected as the AMC of the surviving REIT following the merger must be cancelled with approval by a majority vote at the unitholders’ meeting. Alternatively, the AMCs of the REITs to be merged may also merge concurrently with the merger of the REITs.
Since M&A transactions of real estate companies are essentially the same as those of ordinary companies, with the same applicable laws and regulations as mentioned above, this section will focus on the typical terms of acquisition agreements concerning REITs.
As mentioned above, parties must enter into a written merger agreement on the fundamental terms and conditions of the contemplated merger. The Investment Trust Act provides the minimum matters to be addressed in a merger agreement for investment corporations, which include:9
In practice, in addition to these matters, the merger agreement may also provide for certain conditions precedent, such as obtaining consent to the merger from lenders to each investment corporation involved and obtaining approval of the unitholders’ meeting of the surviving corporation with respect to amendment of its articles of incorporation or termination of the asset management agreement.
On the other hand, in a transfer of shares of an AMC, the share transfer agreement typically contains the following clauses:
The terms to be included in a definitive M&A agreement for REITs are negotiated between the parties and may depend on the purpose of the transaction, the attributes of the parties and the size of the target company, among other factors.
In the representations and warranties clauses, the parties to an agreement represent and warrant the existence or non-existence of specific facts and rights or obligations, usually as at the signing date of the agreement and the closing date, including in transactions where a private equity firm is a selling party. The representations and warranties requested by the buyer usually cover various aspects of the target company’s business and, in a case where the target company is an AMC, this would typically include the validity of permits or licences held by the AMC and its power and authority to manage the investments of the REIT. Representations and warranties are generally not provided in a merger agreement since there will be no party to bring a claim for damages against after the merger for breach of the representations and warranties.
In recent years, the number of transactions armoured with deal protection clauses (e.g., break-fee clauses and exclusive negotiation clauses) has increased. However, because there are few Japanese court precedents regarding deal protection clauses – whether in the context of REIT M&A transactions or M&A transactions in general – it is unclear whether a court would uphold their validity, particularly when they might conflict with the fiduciary duties of a target’s directors or board of officers. With respect to break-fee clauses, if the break fee is unreasonably high, there is a possibility that a court might hold that an arrangement is against the public interest and declare it null and void.
On the other hand, reverse break-fee arrangements have yet to gain traction in Japan, including in transactions where a private equity firm is the purchasing party.
Hostile TOBs remain rarer in Japan than in the United States and certain European capital markets, and, because of cross-shareholdings (although cross-shareholdings, which were seen frequently in Japan, have declined considerably), management-friendly investor blocs and a variety of other defence mechanisms, no hostile bidder has succeeded in securing more than a majority stake in a major Japanese target.
Assuming that the AMC of the target REIT is not a publicly traded corporation, the acquirer must:
In connection with (a) above, the target REIT would lose its tax conduit status if a majority voting interest is held by one unitholder and its affiliates at the end of the fiscal period, so it usually has been considered that purchasing significant unitholdings is not, as a practical matter, feasible. However, in the case of the hostile TOB for Invesco Office J-REIT Investment Corporation, a J-REIT (Invesco J-REIT) by US-based Starwood Capital Group (Starwood),10 the proposed acquisition ignored the target’s tax conduit status (i.e., a tender offer to acquire more than 50 per cent of the units of the target J-REIT). The reason behind this, it is believed, is that it would be more efficient and profitable to acquire this particular J-REIT’s high-quality real estate than to gain the tax benefits from its conduit status.
In connection with (b) above, the articles of incorporation of an investment corporation often have a deemed consent provision (a provision to the effect that if any unitholder does not attend the unitholders’ meeting to vote and does not exercise its voting rights in writing, that unitholder shall be deemed to have voted in favour of the proposal submitted at the unitholders’ meeting). While this provision’s application can be blocked by forcing the target REIT to have conflicting proposals submitted to the unitholders’ meeting, unless the hostile party forces the situation, it was generally believed that this provision can make it easier for the incumbent management to retain the status quo in fending off a hostile takeover. However, the hostile takeover of Sakura General REIT Investment Corporation, a J-REIT (Sakura REIT), by Star Asia Investment Corporation (Star Asia), tested this belief. In this case, a company of the Star Asia Group, which was an existing unitholder of Sakura REIT, requested the convocation of a general meeting of unitholders and proposed that the contract with the existing AMC be terminated and a contract with a new AMC be concluded.11 In response, Sakura REIT submitted its own objection proposal and requested that its proposal also be included in the agenda of the general meeting of unitholders by Star Asia. This was done, it was considered, in order to prevent Star Asia from prevailing through the application of deemed approval. When a court considered this situation, however, the court held that a unitholder who sought to hold a general meeting was not obliged to comply with the company’s request. In other words, if a unitholder requests a general meeting of unitholders in order to conduct a hostile takeover of a REIT and holds a general meeting on its own, it may be difficult for incumbent management to maintain the status quo, because the REIT cannot submit conflicting proposals at such a general meeting in order to eliminate the possibility of deemed approval from benefiting the acquiror.
In response to this development, J-REITs have recently tended to include provisions in their articles of incorporation that exempt the application of deemed approval from being recognised. As a result, while in the past it was possible to avoid deemed approval by non-attending unitholders from occurring by an opponent of the TOB submitting a counterproposal to be considered at the meeting, another approach now being utilised is to simply preclude the concept of deemed approval just by expressing opposition to it.
Where the acquirer is a stock company under the Companies Act, the acquisition may be internally funded by the acquirer or externally funded by the acquirer through equity financing or debt financing. Where the acquirer is a private equity fund, the acquirer itself usually does not become a debtor for the acquisition financing – a special purpose company incorporated by the private equity fund for the purpose of the acquisition usually becomes the debtor.
In the case of a merger between REITs, capital usually does not need to be raised for the merger since the consideration for the merger is basically limited to the units of the surviving REIT under the Investment Trust Act.
Tax considerations for M&A transactions of public real estate companies are essentially the same as those for M&A transactions of ordinary companies, with the same applicable laws and regulations.
With respect to REITs, the acquisition of shares of an AMC is a taxable transaction, and the seller will be subject to income tax on any gains. If the seller company is not a resident of Japan, it could be subject to Japanese capital gains tax; however, an exemption may be available depending on the percentage of its ownership of the shares or the applicable tax treaty. A merger of an investment corporation can be implemented without income taxation at the time of the transaction (in substance, tax deferral) if the transaction satisfies the requirements for tax-qualified restructuring.
In addition, the 2009 tax reform made it possible for a surviving REIT that obtains negative goodwill (i.e., an unrealised gain of the dissolving REIT) by conducting a statutory merger to deduct the negative goodwill from its distributable income for the fiscal year as long as the gains are not realised, making it easier for the surviving REIT to satisfy the conduit requirements. Further, the 2015 tax reform enabled the inclusion in expenses of the distribution in excess of net income equivalent to the amortisation costs of the goodwill.
There are no direct restrictions on the acquisition, either directly or through a vehicle, of commercial or residential real estate in Japan by foreign investors. Similarly, the establishment of a corporation by foreign investors to invest in commercial or residential real estate is not restricted.
After a foreign investor acquires real estate or a right related to real estate, a post-transaction report to the relevant governmental authority is generally required pursuant to the Foreign Exchange and Foreign Trade Act of Japan (FEFTA). In addition, after a foreign investor acquires shares or equity in a corporation, a post-transaction report to the relevant governmental authority may be required pursuant to FEFTA.12
Corporate real estate
In recent years, there has been a trend for Japanese companies that have corporate real estate to manage and operate their real estate strategically. The strategic management and operation of corporate real estate often take the following forms:
Outlook
As mentioned above, the market size of Japanese real estate investment is the second-largest in the world, but considering the size of Japan’s GDP, it is believed that there is still room for further market expansion and growth.
In March 2016, the Ministry of Land, Infrastructure, Transport and Tourism’s advisory panel of experts published a growth strategy for expanding Japan’s real estate investment market. The published growth strategy foresaw an increase in the amount of assets under management by J-REITs to up to ¥30 trillion by 2020, which was approximately twice the amount as of March 2016. The growth strategy pointed out that measures were needed to be taken to encourage expansion by J-REITs into assets in growing sectors such as the tourism, logistics and healthcare industries. This optimistic forecast has not yet been reached, however, and, as noted earlier, as of the end of April 2022, 61 publicly listed REITs are operating with total assets under management of approximately ¥21.3 trillion.
Furthermore, in June 2017, the Ministry of Land, Infrastructure, Transport and Tourism (the Land Economy and Construction Industries Bureau) published a new action strategy for growth in the real estate investment market. This growth strategy pointed out that it is necessary to improve and enhance real estate investment through reforms to corporate real estate, the J-REIT market as a whole, the investment environment of real estate investors and human resource development in the real estate sector to sustain attractive and stable growth of Japan’s real estate investment market. It is expected that the implementation of these measures in the near future would further promote the expansion and growth of the J-REIT market in the medium to long term, and increase the number of real estate M&A transactions as a means of new entry into the REIT market or of achieving external growth by existing REITs.
More recently, in April 2019, the Land Economy and Construction Industries Bureau issued a predictive statement for the first time in 25 years. ‘The Vision of Real Estate Business 2030’ describes the sustainable development of Japan’s real estate business through cooperation between the government and the private sector. At the same time, the Vision suggests that companies should be mindful of the environment and other social and governance (ESG) concerns when seeking to operate in the real estate business and in developing and managing real properties. In addition to benefiting society as a whole, it is believed that integrating these ESG concerns into the Japanese real estate market will enhance the attractiveness of investing in real property.13
Outlook and conclusions
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