18th January 2016

News of pension funds’ exemption from FIRPTA is garnering interest among Japanese pension funds are now looking at the US real estate as a potential investment destination. The Protecting Americans from Tax Hikes Act of 2015 was introduced on the 18th of December 2015, which permits certain entities exemption from FIRPTA taxation.

The beneficiaries include Japanese public pensions such as GPIF (Government Pension Investment Fund, 1.12 trillion USD), Chikyoren (Pension Fund Association for Local Government Official, 176 billion USD), KKR (Federation of National Public Service Personnel Mutual Aid Service, 65 billion USD), Promotion and Mutual Aid Corperation for Private Schools of Japan (35 billion USD), and PFA (Pension Fund Association, 105 billion USD), as well as large corporate pension funds.

In fact, the aforementioned public pensions, GPIF and Chikyoren have already announced that they will invest in overseas real estate – which may possibly attract more Japanese investors and other public pensions to head in the same direction.

This New FIRPTA Reform will be a favorable wind for Japanese public pensions – determining the structure of US real estate investments.

Some large corporate pensions have made overseas real estate investment in 2015, and large Japanese public pension funds are expected to make a move in overseas real estate in 2016.

A recent trend has divided corporate pensions into their investment decisions. Smaller corporate pensions with a ticket size of 5-10 million USD tend to invest in domestic real estate through domestic private REITs, which are similar to non-listed REITs and open-ended funds. Whereas, larger corporate pension funds generally have a ticket size of over 50 million USD, and they are now showing interest in overseas real estate opportunities.

Direction of Japanese pensions to start investing in real estate is bipolarized. Small corporate pensions have invested Japanese private REIT, while large corporate pensions have invested overseas real estate. The common concept is, core investment can offer stable income.

Once, some Japanese investors had considered US real estate to be expensive and were at a very matured point in the market cycle. Yet, New FIRPTA Reform will be a great impact and strong magnet to pull those investors.

The US can be seen as a more attractive market for Japanese public pension funds who are looking to gain the most out of their overseas investments.

 

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For further details about this newsletter and our services please contact: Yukihiko Ito (yuki@asteriskrealty.jp) / Kat Hoang (k.hoang@asteriskrealty.jp)

About Asterisk Realty & Placement Agency

Asterisk is a pioneer private fund placement agency for global real estate in Japan. Through our unique and extensive network of Japanese investors, we support global fund managers to access Japanese and Asian institutional investors (pensions, financial institutions, real estate developers, other business companies, etc.).

We provide access and strategies for overseas fund managers to bridge the gap between them and Japanese investors.

Asterisk Inc.,
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Telephone: 03-3263-9909
Email : info@japanplacementagent.com
Website : https://japanplacementagent.com/en/
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