Commercial Mortgage-Backed Securities To Top Y1tln In FY05

August 19, 2005
Commercial Mortgage-Backed Securities To Top Y1tln In FY05

TOKYO (Nikkei)--Spurred by the recovering real estate market, the value of commercial mortgage-backed securities (CMBSs) issued domestically since April has reached almost 700 billion yen, about the same as in all of fiscal 2004.
The total amount for fiscal 2005 is expected to exceed 1 trillion yen. Domestic sales of CMBSs got into full swing in 2000. According to the Association for Real Estate Securitization, the value issued stood at 755 billion yen in fiscal 2004, up 24% over the previous year. And fiscal 2005 has a string of high-profile deals exceeding 100 billion yen, including the Shinagawa Mitsubishi and Shinjuku Sumitomo buildings.
The investor base is expanding as the market grows. During the upcoming rollover of past securitization, Seibu Department Stores Ltd. plans to add funds needed for quake-proofing and other work at its flagship Ikebukuro store, for a package totaling 116.5 billion yen. This will be the largest-ever financing for a single department store, of which more than 70 billion yen in CMBSs will be sold to nearly 100 investors.
"Not only large commercial banks and life insurance companies, but also regional banks, credit associations and credit cooperatives, will participate," according to an official at lead manager Nomura Securities Co.
More than 70 foreign banks, life insurers, regional financial institutions and other investors took part in the 125 billion yen issuance in July for the Shinagawa Mitsubishi building.
"Returns are relatively high, "exceeding corporate bonds by about 0.2% to 0.5 percentage point," in the words of Miwa Suzuki, senior ABS analyst at Mitsubishi Securities Co. (8615).
CMBSs represent a large chunk of the securitization market, after residential mortgage-backed securities, asset-backed securities and other products.

(The Nihon Keizai Shimbun Friday morning edition)