Japanese Real Estate Investment Trusts : champagne bubbles or price bubble

In September 2001 the Japanese real estate industry marked a new era of real estate investments by issuing on the Tokyo Stock Exchange the first Japan Real Estate Investment Trust (JREIT). The initial JREIT performance was not so impressive. Now, as the Japanese economy continues to recover and more investors are looking to real estate securitization as a means of limiting balance sheet liability and increase real estate investment liquidity, the JREIT is becoming a popular investment vehicle. On the surface the public securitization of real estate seems a great opportunity for the average investor to participate in real estate investment while keeping liquidity. What is the real story behind the JREIT: Are the assets in the JREIT overpriced? Is the race to issue new JREITs forming a price bubble in the Tokyo central business district? Is the JREIT a safe investment, or is it just a way for real estate firms to pass off the associated risks of overpriced real estate? This paper will consider the status of the Japanese economy, the real estate industry, and the JREIT market from its beginnings to current levels. Thesis Supervisor: David Geltner Title: Chairman, Interdepartmental Degree Program in Real Estate Development