DEALTALK-Foreign buyers hungry for Japan real estate

(For more Reuters DEALTALKS, click [DEALTALK/])

* Investors include Blackstone, Mapletree

* Data show that Japan property bottoming out

* Distressed property appeals

By Lee Chyen Yee and Mariko Katsumura

HONG KONG/TOKYO, Sept 10 (Reuters) - Investors from the
United States to tiny land-hungry Singapore are on the hunt
for
real estate in Japan, with over $2 billion in deals already
cemented since late last year and more in the offing.

In the buyers' sights are a thick catalogue of properties,
many of them in Tokyo, a city populated by thousands of office
buildings and condominiums.

"Hotels, Tokyo offices, Tokyo residential, I would say,
will be the three specific sectors and opportunities that are
being most sought after by international investors," said
Alistair Meadows, Asia Pacific director for International
Capital Group at global property services firm Jones Lang
LaSalle.

Buyers who have already declared their interest include
Mapletree Investments, the real estate arm of Singapore's state
investor Temasek Holdings [TEM.UL], with close to $1 billion in
new cash earmarked for office buildings, data centres and
research and development facilities.

Joining Mapletree in the rush are American private equity
firms Blackstone Group (BX.N) and Fortress (FIG.N), Germany's
Deutsche Bank (DBKGn.DE) and U.S.-based Jones Lang LaSalle's
(JLL.N) funds arm LaSalle Investment.

Franklin Templeton is looking to buy a portfolio of
distressed loans at a discount, which would provide attractive
returns and allow access to physical assets, while Blackstone
plans to buy Morgan Stanley's loans (MS.N), which are backed by
commercial real estate such as office buildings.

Taiwanese real estate broker Sinyi Realty 9940.T set up
operations in Tokyo a few months ago. And for wealthy Chinese,
travel agencies have even started offering "Buy Japanese
Property" tours.

Realtors say major foreign private equity groups, real
estate trusts and realtors have earmarked an estimated $6.6
billion for investments in Asia, showing interest in Japan's
bricks and mortar assets and property debt.

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Factbox on Japan deals by overseas firms [ID:nTOE68603V]

Graphic on capitalisation rates in Japan's property sector:

link.reuters.com/dat42p

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"While we are cautious around the country's fundamentals,
we do believe that the sheer size of the market allows for
opportunities," said Peter Kim, Managing Director, ING Real
Estate Investment Management, which has funds invested in
Japan.

A bottoming out of real estate prices and a recovery in the
debt market are some positives investors are buying into.

Marquee deals already done include a Hong Kong investor's
buy of the Hyatt Regency hotel in Hakone from Morgan Stanley
(MS.N) for an estimated $56 million.

Malaysian investor YTL Corporation (YTLS.KL) also inked a
deal in March to buy Hilton Niseko Village for about $48.3
million, marking a major investment in a Japan's well-known ski
resort in Hokkaido.

In a clear indication that office buildings values are set
to grow, cap rates -- the income that the property will
generate divided by its value -- have stopped rising.

"We reiterate our view that cap rates will decline in the
second half of 2010 and that real estate prices are very likely
to rebound," Barclays Capital said in late August.

Distressed or marked-down properties in Japan, such as debt
backed by commercial real estate, are also emerging on the
radars of foreign buyers.

"We are finding a degree of success in finding deals
through trust banks or lenders who have taken control of
over-leveraged assets," said Jacques Gordon, global investment
strategist at LaSalle Investment Management.

As foreign money pours in, the real surge in buying may
just be starting , predicts Mark Brown, a real estate analyst
at researcher Japaninvest.

The gap between what distressed property owners are asking
and the amount buyers are willing to pay is closing fast, he
notes, adding that would lead to plenty of new deals.
(Additional reporting by Eriko Amaha in SYDNEY; Editing by Tim
Kelly, Ken Wills and Valerie Lee)
(See www.reutersrealestate.com for Reuters' global service for
real estate professionals)