Japan seen eyeing REIT properties

JAPAN may set up a US$10bil fund to buy properties held by real estate investment trusts (REITs) and make loans to the trusts, the Nikkei business daily said, pushing shares in the hard-pressed sector up nearly 8%.

REITs have fallen on hard times as the global financial crisis has pushed down property values and squeezed financing, driving investors out of the market.

”The news helped ease investors’ worries about the REITs’ financing problems,” said Daisuke Seki, a REIT analyst at IB Research & Consulting Inc.

”If the fund can really buy assets from REITs, then that would help such REITs raise much needed cash and trigger cash flow in the market.”

The Nikkei said ruling coalition lawmakers were concerned that a protracted downturn in the REIT market would hurt regional banks, who are big buyers of REIT units, and damage the financial sector.

One Japanese REIT, or J-REIT, has failed so far during the crisis, while 16 listed property companies collapsed last year.

Regional banks are suffering in the global crisis, as sliding exports and a deepening recession in Japan hit their customers, with falling property values adding to the pain.

A panel from the ruling Liberal Democratic Party and its coalition partner, New Komeito, is looking at the problems of REITs as part of measures to stabilise financial markets, an LDP official said, but no decision had been taken.

The coalition parties are planning to finalise the stabilisation measures by the end of the month.

By Reuters