Relationship with Commercial Banks

It is often heard that many J-REITs have had difficulty rolling over the debts. In a sense, the debt availability had been given for J-REITs; therefore, they had believed that they would hold real properties for long. If they cannot refinance outstanding debts, they will be forced to liquidate real properties, because it is almost impossible to raise funds via issuance of new equities under the current market conditions. However, it is not necessarily easy to sell them. It is primarily because financial buyers, driving forces of acquisition machines, now hardly borrow the money in the market.

There are several reasons for that: first, the global credit crunch has had a big impact upon the Japanese loan market as well and second, there are a diminished number of balance sheet lenders after many conduit lenders are gone. There are only three so-called "mega" banks. Retrospectively looking, we can say some J-REITs, which heavily have relied on the finance from the capital market, should have maintained a better relationship with commercial banks, for such J-REITs can hardly issue debt instruments in the capital market.