Japan panel seeks more lending for Japan REITs

By Junko Fujita

TOKYO, July 3 (Reuters) - A panel backed by Japan's land ministry is seeking ways to encourage lending to the nation's real estate investment trusts, whose market value is down 60 percent from its peak two years ago, as well as debate on varying ways of financing them.

"The REIT market has improved from the worst but we cannot be optimistic about the outlook yet," said Shinsaku Iwahara, a professor at the University of Tokyo who chaired the panel.

The panel, comprising academics, investors and real estate firms, ended its discussions on Friday on how to boost Japan's REIT market, a topic it took up last year.

Japan's REIT market has been hit hard as the global financial crisis pushed down property values and squeezed financing, driving investors out of the market.

New City Residence Investment Corp became Japan's first REIT to fold in early October.

The panel wants the Financial Services Agency to encourage banks to lend more to real estate trusts so they can buy more properties to expand, said Takuya Ishikawa, a director at the land ministry.

The panel also seeks further discussions on varying funding methods for the real estate trusts, including allowing them to sell convertible bonds.

Investors have become more optimistic on REITs after signs of industry consolidation, which this week sent the the Tokyo Stock Exchange's REIT subindex .TREIT rise its highest level since Oct. 6.

Daiwa Securities Group (8601.T), Japan's No.2 brokerage, plans to spend about $140 million to take a stake in DA Office Investment Corp (8976.T), a REIT which mainly invests in office buildings. Daiwa will also buy DaVinci Select, the firm that manages the REIT. [ID:nT58298]

But it is still down about 60 percent from a peak hit in May 2007.

The panel also included Toshihiko Okino, a real estate analyst for UBS Securities Japan, Masao Shibuya, corporate adviser for Sumitomo Trust and Banking Co. (8403.T), Hiroshi Danno, executive vice president for Mitsubishi Estate Co (8802.T). (Editing by Michael Watson)