Honeymoon's Over for J-REITs

I wrote last month that current J-REIT prices are unsustainable, mainly because of falling yields and rising interest rates. Compared to global REIT PERs, those of Japanese REITs’were certainly very high, too. Now, the fast money is beginning to move out.

Investors gave two new J-REITs the cold shoulder in as many weeks, pushing their prices well below their IPO levels. First Credit’s FC Residential Investment Corp. (8975), which listed on Oct. 12, which listed at 475,000 yen per share, went down 15% on its first day of trading, and is now at 420,000. daVinci Advisors’ DA Office Investment Corp. (8976) – which I wrote about earlier - suffered a similar fate. It listed today at 515,000, only to be slashed to 458,000 by the end of trading (chronicled here; good commentary on the issue here). It is the fifth REIT since July which has seen its opening price fall below the IPO level.

These two pieces by the Nikkei puts the issue in perspective:

Until recently, many individual investors scrambled to obtain REIT's IPO shares, assuming that they would open at much higher levels than their IPO prices. But the approach lacks any proper rationale, since a REIT is a financial product which distributes rental income from properties in which it has invested, and therefore, unlike stocks, it is not suitable for pursuing capital … individual investors targeting short-term profits are now beginning to distance themselves from the market.

So basically we’re seeing the speculators being driven out. Which is not necessarily a bad thing. The novelty of J-REITs has worn off; be braced for more adjustments as more investors take a long, hard look at their current holdings.

Japan Real Estate Blog
Tags : japan, real estate, property, investment, 不動産
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