Thursday, October 27, 2005

Osaka's First REIT Gains Fans

Osaka’s Hankyu REIT (8977) listed on the Tokyo Stock Exchange yesterday at 620,000 yen per share. It put in a respectable performance, compared to recent new issues (see this previous post), and ended at 630,000. At noon today it is at 643,000. Not bad (speculation: Osakans are glad to see a new REIT that focuses on their area).

It currently has five assets, mostly retail or mixed-use buildings in the Osaka area. I visited some of these last year and was impressed. Their largest asset is the HEP Five shopping mall (1998, 52,755 sqm, see pic) in Osaka’s central Umeda area. The mall has a 75-meter ferris wheel on top! The REIT’s assets are solid and reportedly the proportion of sales-based percentage rent to their income is high (more than 50%). I guess investors are expecting the Kansai economy to make a comeback soon, pushing up rental income from the stores. I’m not so sure about the upside story, but I can understand people wanting to diversify into Kansai after many other REITs have concentrated on the saturated Tokyo office market.

The REIT is sponsored by Hankyu Holdings, parent of Hankyu Railways. They recently raised 40 billion yen to redevelop their flagship Hankyu department store near Osaka Station, near Umeda. Other redevelopment projects in the works include a huge residential and commercial project, slated to finish in 2008, on the 140,000 sq.m. site of the former Takarazuka Family Land, which closed in 2003. Hankyu is also building residential and retail to open in 2007 in Nishinomiya, Hyogo, near the Nishinomiya-Kitaguchi station and on the site of the former Hankyu Nishinomiya Stadium. All three projects are on the company’s Hankyu Railway line.

While things are going well for the Hankyu camp, elsewhere in Osaka, the Hanshin REIT idea that I speculated upon previously seems to be facing opposition from within the company. The chairman of Hanshin Department Stores, Teruyuki Saegusa, poured cold water on the proposal, saying that if the REIT were established, they would become mere tenants, and "we would have to consider whether our profit level can justify leasing from an outside party". So, Mr. Saegusa, are you implying that you wouldn't be able to afford the rent?

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阪急リート REIT 上場 阪急電鉄 再開発


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