Deutsche Securities Creates Fund Seeking Sale Leasebacks With Hospitals in Japan

MarketWatch - April 3, 2007

Deutsche Securities said Tuesday it will establish an investment fund specializing in hospital real estate management in collaboration with Itochu Corp. by the end of this month as the Topix real estate investment trust, or REIT, index reached a new lifetime high Monday. The fund will be capitalized at Y300 million, with the two firms each committing Y100 million and the remainder coming from other parties.

"We are looking to set up a fund which can combine our financing know-how with Itochu's depth of experience in the Japanese healthcare field," said a spokesman for Deutsche in Tokyo. Although the Deutsche-Itochu venture is being set up initially as a private fund, a spokesman for the German financial firm said it was looking at the possibility of converting the fund into a REIT in the future.

Deutsche's latest foray into Japan's real estate market comes as the 4-year-old Topix REIT index hit a lifetime high of 2492.92 yesterday. It is up by more than 47% since the end of last September as investors flocked to the sector, attracted by the comparatively high-yields offered by REITs in Japan's ultra-low interest rate environment.

Deutsche said the fund, which will buy real estate from hospitals with the aim of managing properties and leasing them back to the hospitals, would give its investors' exposure to Japan's growing economic recovery outside its major cities. The venture also underscores growing interest among real estate investors in moving outside of central business district properties in Japan's major cities now that many of these areas are tapped out, say analysts.

The brokerage also said that real estate funds are increasingly having to look at alternatives "outside of Tokyo, where competition for properties is less intense and yields are higher." Sphere: Related Content