June 24, 2009 / 6:03 AM / 8 years ago

Orix eyes joint property deals this year

TOKYO (Reuters) - Japan's Orix Real Estate Corp aims to close property investment deals worth as much as a few billion dollars with overseas investors by the end of this year, its president said on Wednesday.

The company is also interested in launching a new real estate investment trust (REIT) when the market recovers, but it has put its overseas investment plans largely on hold, company president Yoshiyuki Yamaya said in an interview for the Reuters Global Real Estate Summit.

Orix Real Estate is a wholly owned unit of Orix Corp, Japan's biggest leasing firm and an active property investor, generating about one third of its parent's profits.

Japan's property market has been hit hard as the nation's worst recession since World War Two saps demand for houses and office space and as banks rein in lending to the highly indebted sector.

But with increasing signs the market could be bottoming out, some foreign investors have begun showing fresh interest in the Japanese property market, the world's second-biggest.

Yamaya said Orix Real Estate has been in talks with a number of potential partners about domestic investment plans.

"We would like to make some sort of announcement in early autumn or by the end of this year," Yamaya said, adding that the investments would total a few hundreds of billions of yen.

"We'll not shoulder all the financing ourselves, but for example if we are to launch a fund or REIT, the amount would total about that much," Yamaya said.

The president of Orix Corp told Reuters in April that it plans to partner with other investors to put a few billion dollars into real estate and other assets discounted by the financial crisis.

Orix Real Estate, expected to offer 1,800 apartment rooms this year, also runs golf courses and hotels, hotel business revitalization and nursing home development businesses.

But Yamaya said that the company's plans to expand its property investment business overseas, mentioned in the Orix group's business strategy, have largely been put on hold.

"If you ask if it's a good time to expand the (property) business overseas, then I would say it's a bit risky. So we're currently reviewing our global property investment strategy," he said.

INTEREST IN REITs

Yamaya said if Orix Real Estate were to launch a new REIT, it would try to ensure there would be little overlap with Orix JREIT which mainly invests in office buildings.

"For real estate companies, REITs are really important vehicles," said Yamaya. "We would positively consider (a launch) if a good chance emerged."

But the new launch would not take place until the country's REIT market shows more signs of recovery, hopefully helped by government-led efforts to spur the struggling market, said Yamaya.

The Tokyo Stock Exchange's REIT subindex has lost about 65 percent since hitting a peak in May 2007 as the global financial crisis has pushed down property values and squeezed financing, driving investors out of the market.

But an increasing number of companies are showing interest in entering the market or expanding existing REIT businesses, with Mitsubishi Estate Co, Japan's second-biggest developer, also considering buying a REIT.

(For summit blog: blogs.reuters.com/summits/)

Reporting by Mariko Katsumura; Editing by Edwina Gibbs and Joseph Radford

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