TOKYO, Sep 1 : A new wave of big private equity players including KKR & Co is moving in on Japan's property market, drawn by attractive yield spreads with Japan's low interest rates and by prospective deals with companies that hold under-utilised assets.
KKR's Japan investments have for years focused on acquiring companies, but in March it signalled a move into the local property market when it announced a 230 billion yen acquisition of a Japanese real estate asset manager. A key attraction for new private equity entrants is the standout returns Tokyo's office market has delivered so far this year.
In 2013, when former premier Shinzo Abe's aggressive"Abenomics" stimulus policy sparked a turnaround in Japan's property market from the great financial crisis and a recovery in foreign investment, the cap rate was 3.7 per cent. "Many Japanese companies traditionally own real estate assets but often their potential is not fully realised, as they are managed by non-professionals," said Man Kinoshita, head of the Japan real estate business at Goldman Sachs Group.