contents - Saizen REIT

CONTENTS
The Real Estate Sale And
Purchase Process In
Japan Page 2
News Digest Page 5
Tenyu Staff Journals
- Aya Okamoto Page 7
- Emi Matsuura Page 9
Example Properties On The
Market Page 11
掛橋
Kakehashi
FEB 2011
The Real Estate Sale And Purchase Process In
Japan
By Yutaka Matsunaga
Dear All,
The Japanese property market continues to recover, and we are seeing an increasing flow of
potential deals. On these are encouraging signs of a promising new year.
We at KK Tenyu wish our readers all the best in the Year Of The Rabbit.
And on to the main topic:
Since 1999, I have been involved in the purchase of over 240 Japanese residential properties
for investment purposes (rental or chintai (賃貸) properties) on behalf of individual investors,
private funds and Saizen REIT. When we first started, I recall we received many queries
regarding the many customs that are unique to Japanese property transactions. Many readers
of this newsletter also may have (or may, in the future) similar queries, and therefore I have
decided to take up this topic this month.
The typical process of sale and purchase of a residential property for investment (chintai
properties) could be summarized as below:
Phase 1
Seller
Hold discussions with the
agent regarding seller side
conditions for sale
Buyer
Hold discussions with the
agent regarding buyer side
property preferences
Comments
There is no publicly available information on
recent transactions. Neither the buyer nor the
seller has an obligation to notify any public
authorities of a transaction occurring unless
under special circumstances specified under
law.
The buyer or seller negotiate with agents on the
agent's fee, which is usually 3% of maximum
transaction value. The actual fee amount is not
known until execution of the Sale and Purchase
agreement (S&P), which stipulates the property
purchase price.
An agent agreement takes two forms, exclusive
and general. In order to prevent a seller's agent
from monopolizing deal information, an agent
who has obtained an exclusive agreement must
list the property for sale on a real estate
information data system called REINS, which is
accessible by the agents of potential buyers.
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Phase 2
Seller's agent engages in
sales activity.
Phase 3
→ Buyer's agent engages in
← search activity.
The information sharing ability amongst agents
is very advanced.
← Tender (買付申込書)
submitted via agent
Neither the Tender nor the Summary of Sales
Terms are legally binding. Neither are there any
deposits required. An S&P Agreement is
produced based on terms indicated in the
Tender and Summary of Sales Terms. The S&P
terms are legally binding.
Summary of Sales Terms (売 →
り渡し証明書) sent via
agent.
Provisional Agreement
→ Provisional Agreement
←
Phase 4
Agent produces S&P
→ Accept terms of S&P
Agreement and an
Agreement
Explanation of Important
Matters document (重要事
項説明書).
Preparation of the S&P Agreement is usually
done by the agent, not lawyers, unless the
transaction size is large.
Explanation of the contents →
of the Important Matters
document (重要事項説明
書) by the agent.
Under the rules of the Real Estate Association,
the agent has an obligation to explain the
contents of the Important Matters document to
buyer.
Execution of S&P
Agreement
→ Execution of S&P
← Agreement
The terms in the S&P agreement state whether a
deposit payment is necessary. Special provisions
(銀行融資特約) may be included, such as a
clause stipulating that if bank financing is not
available, the agreement can be nullified.
(If deposit is involved)
Receipt of deposit
→ (If deposit is involved)
← Payment of deposit
As there is no custom of using escrow accounts
in Japan, deposit payments are made directly
into the seller’s account. Should the seller be
paid a deposit, then go bankrupt before the
property transfer is registered, the buyer has
rights equivalent to that of a general creditor
when claiming for repayment.
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Phase 5
Send all documents
→ Judicial scrivener checks
required in the ownership
that all relevant
transfer to be reviewed by
documents are
the Judicial scrivener (title
satisfactory.
deeds, power of attorney,
discharge of mortgage etc).
The buyer does not receive
the original documents until
full payment is made.
← Transfer of full payment to
seller’s bank account
The accepted norm is for the seller, buyer,
judicial scrivener (usually hired by the buyer)
and agents to gather at the financial institution
providing financing and wait together until all
arrangements have been finalized. When
payment is received by the seller and ownership
transfer documents received by the buyer, the
meeting concludes. Registration of ownership
transfer is valid from day the request is
submitted.
After checking for receipt of → Judicial scrivener takes
payment, seller releases all
title transfer documents
relevant documents.
and mortgage documents
(if the buyer obtained
financing) to the Land
Registry and submits a
request for property
transfer.
The practices that are noteworthy in Japanese property transactions are summarized below:
1. In Japan, there is no official system which compiles and publishes historic transaction data.
Inevitably, one is largely reliant on the advice of the agent (thankfully, information sharing
amongst agents is excellent).
2. The role of the agent is not only limited to marketing activity but is more extensive,
covering such areas as preparation of the sale and purchase agreement etc.
3. Usually, there are no lawyers involved. Judicial scriveners are responsible for checking
property transfer documents.
4. As escrow accounts do not exist, a prior check into the background of the other party by
the agents (eg. Introduction by a reliable party, past transactional history) is crucial.
5. The transaction format is heavily influenced by the agents.
The purpose of this article is not to start a debate on whether Japanese or foreign practices are
superior. It is up to the individual investor to decide how to realize his/her ideal investment. In
Japan, there is a wide range of choice of property agents, from mega sized real estate agency
firms covering the entire country to small/medium sized agencies which specialize in certain
districts only. Large scale property investors or those that seek an agent capable of solving
problems which may occur during a transaction should appoint a large agency firm. On the
other hand, if an investor is confident of his/her own ability and prefers an agent that willingly
acts as the client wishes, he/she should choose a small- or medium-sized agent.
Tenyu is happy to provide assistance during this process.
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掛橋
Kakehashi
FEB 2011
Tenyu Monthly News Digest
A digest of news and topics of interest regarding Japan and its property market
Employment rate of university graduates – worst since 1996
The percentage of university students expecting to graduate in March this year and join the
workforce from April who had obtained confirmed offers from employers as at 1st December was
68.8 percent, the lowest since the survey started in 1996, and the first time it was below 70
percent. The survey was conducted at 62 public and private universities nationwide and with
students actively seeking jobs.
In Japan, it is standard practice for university and high school graduates to obtain confirmed
offers prior to graduation and these statistics are watched carefully by the business community
to gauge the level of business confidence. In recent years, shukatsu (就活, short for 就職活動, or
job hunting) has become more heated amongst university students, and many students spend
their last two years (most university courses are four years in Japan), investing far more time and
energy in job hunting rather than studying.
In comparison to 2010, the percentage of male students with confirmed offers fell by 2.9% to
70.1% whilst the same numbers for female students were worse, with a 5.8% fall to 67.4%. Arts
students recorded 68.3%, a fall of 3.7% compared to the previous year, and even the sciences
students who are traditionally thought to have an advantage when job hunting only recorded
71.3%, down 7.3%.
High school students fared a little better. The percentage of students with confirmed offers as at
the end of November was 70.6%, a 2.5% increase from the previous year. Male students
recorded 75.8% (2.7% increase) and female students 63.7% (2.0% increase). The reason high
school students did better than in previous years is thought to be that they were better prepared
and commenced their job hunting activities earlier, having watched their predecessors have a
tough time getting jobs.
Source: Asahi Shimbun 18/1/2011
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Commercial property rental rates in major Tokyo districts in 3Q 2010
Rental rates of commercial properties of major districts in Tokyo for the third quarter of 2010
have been compiled by ReReM, a market data system jointly developed by Attractors Lab Co. and
BAC Urban Projects. The information is based on publicized information, with individually
sourced transaction data and other market-based information. As the information is taken from
websites advertising rental properties, some rent rates include management fees. ReRem
calculates management fees to be around JPY1,000 per tsubo (坪) per month.
Below is a table of rental rates (including management fees) in various areas in Tokyo.
Asking rent
(JPY/tsubo)
1F
Other floors
Average
Properties
Surveyed
Ginza
銀座
49,663
25,721
30,065
496
Omotesando
表参道
37,487
26,814
30,149
784
Shinjuku
新宿
37,418
20,654
22,931
670
Shibuya
渋谷
29,582
20,768
21,896
1,031
Ikebukuro
池袋
16,925
17,812
17,668
700
Source: ReReM, July to September 2010
Source: Ken-Platz
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掛橋
Tenyu Staff Journal
Kakehashi
FEB 2011
These journals by the staff in our three Japanese offices record both the
ordinary and the unexpected they face as they go about their work everyday
Aya’s Journal
Hello! It’s Aya. I am a Manager in charge of leasing for the Hokkaido area. I am based in
the Sapporo (札幌) office.
Entry: January 20, 2010
I was on a holiday in Australia from the 2nd of January. Prior to my departure, I thought
that this winter was one of the least snowy winters in all my life, and then, after I came
back, I found myself in shock – the snow had increased by 100 times (note: this is my
personal perception, and is not necessarily scientific)! We are experiencing unusual winter
weather all over Japan and the cold snap is just phenomenal. With “drought–riddled”
Australia experiencing floods of biblical proportions and all, it really makes one realize just
how reliant mankind is on this mother planet. It’s looking more like the immediate aim of
environmentally friendly activities is “Save mankind!” rather than “Save the planet”, isn’t it?
Anyway, on to my main topic for this month... As a second installment to my previous
blog, I wish to write about the special preparations we undertake for our properties during
the winter in the snow country.
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Take a look at this picture of a window – isn’t it different from your own? Yes, it is
double-glazed (referred to as “pair glass” in Japan) and is used to prevent the cold
outside air from getting in contact with the warm indoor air directly, by effectively
creating an air cushion in between the two (quite apart from the obvious insulation
considerations, precipitation created as a result of direct contact between warm and
cold air results in humidity, which then gets trapped in the wooden material used as
window frames and the walls, creating serious damage in building materials, over time).
These windows are used in most residential properties in Hokkaido.
In order to promote further environmentally friendly consumption by consumers (and
no doubt, to prop up sagging domestic consumption!) the Japanese government
introduced “eco points” last year whereby, if one purchases environmentally or “ecofriendly” housing products, he/she will be entitled to “eco-points” which can be
exchanged for various selected products including shopping vouchers. Depending on the
product, double-glazed windows help you earn points worth around 20 percent of your
purchase, so their usage is now slowly spreading to other regions as well. If you have
the chance to come to Hokkaido, please take the time to look at these windows.
In Hokkaido, we also have another custom. When we vacate our home for a long
period, we close down the main water valve and empty all water pipes in the house.
Can you guess why? It is because the pipes freeze. That probably doesn’t sound so bad
but, as you can easily imagine, water expands when frozen. When that happens disaster
strikes and the pipes burst! So, with all the properties we manage, we ensure all the
water is drained from November onwards. In our parts, -4 Celsius is commonly referred
to as the “freezing sign” and, on truly cold days, the media will run special warnings
called the Freezing Warnings during regular programs.
Going back to my earlier topic, I am amazed at how mankind, is able to innovate and
adapt to the climate. I just hope that we will be able to get over this current extreme
weather unscathed...
This winter, I have strengthened my resolve to engage further in ecologically friendly
activities...
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掛橋
Tenyu Staff Journal
Kakehashi
FEB 2011
These journals by the staff in our three Japanese offices record both the
ordinary and the unexpected they face as they go about their work everyday
Emi’s Journal
How do you do! I’m Emi Matsuura, the System Control Manager.
Entry: 21st January, 2011
I’ve taken a winter break from yoga and am going to the gym. There are so many yummy
things to eat in winter and the indoors is so warm and comfortable! My New Year
resolution is to stop saying “I will start going to the gym from tomorrow”, or “I shall start
xxx from tomorrow”, and actually do it right away.
Something I have noticed recently… All the Tenyu ladies have very pretty nails! They all
have gel nails, the type of manicure whereby you apply a gel resin and harden it with UV
lights. It retains its original luster without going dull for much longer than a regular
manicure. You usually go for a refill once in three weeks to a month.
What I secretly enjoy is to check out everybody’s new nail designs. Whilst talking to Chiyosan sitting next to me, one percent of my brain is focused on her glossy nails. Watching
Aki-san talking on the phone, again, around 1 percent of my brain is concentrating on her
shiny nails.
I visited the Hokkaido office recently, when Ikuko-san gave me a cup of coffee, I noticed
her brilliant nails. When Aya san pointed to a computer monitor to explain something, her
nails glittered as well.
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I therefore decided to go back once again to gel nails!
What’s changed since I re-started having gel nails? It makes me feel happy whenever I see
my glossy nails tapping away on the keyboard. In our lives, there are many things that we
unconsciously observe; having gel nails has made me aware that nails are one of those
things.
There are things in life that are not absolutely essential, but when given attention, have
the potential to enhance one’s life much more. Tenyu believes this and has recently
started to actively engage in making design changes of our properties. These are just some
of the changes we have made:
•
Changing the mood of a regular room by using interesting wallpaper on walls that used
to be white;
•
Changing the fading kitchen cabinet coverings to more colorful designs;
•
Adding patterned sheets to the bathroom walls to liven up the space
We have redesigned many rooms, and found that with a little bit of improvement, a bogstandard room could look far more attractive and change into a “Wow, I want to live here!”
kind of room.
Just as I subconsciously follow the nail designs of the Tenyu ladies, I believe that potential
tenants take note of attractive-looking rooms when room-hunting, and we are finding that
such renovated rooms are far more popular. Don’t you think that, by adding a “designed”
element to very regular “of course it is there” features such as walls and kitchen cabinets,
living in your room becomes much more enjoyable?
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掛橋
Kakehashi
FEB 2011
Example Property on the Market
Tokyo
We have come across a selection of good quality residential buildings in the past month. Set out
below and on the next page are two examples of this selection.
Koishikawa (小石川)
Pictured is a 12 storey 32 residential and 1 commercial unit property. It is located in the Koishikawa area
in the Bunkyou ward, Tokyo. The Bunkyo ward is home to the Tokyo Dome, University of Tokyo, and
Kodokan, the headquarters of the worldwide Judo community. The area is also famous for two gardens, a
botanical garden operated by the Graduate School of Science at the University of Tokyo which is open to
the public. And a traditional Japanese landscape garden Koishikawa Korakuen, which attempts to
reproduce Japanese and Chinese landscape in miniature.
Estimated returns are as follows:
• GOI: JPY 32,808,000
• NOI: JPY 25,224,000
• Asking price: JPY 530 million (4.8% NOI)
Access: 10 min walk to Korakuen subway station
Disclaimer: The above information has been prepared with the assistance of JRAM – Japan Residential Assets Manager Limited. The
information herein has been obtained from sources we believe to be reliable. Such information has not been independently verified and we
make no representation or warranty as to its accuracy, completeness or correctness. Any opinions or estimates herein reflect the judgment of
KK Tenyu at the date of this publication and are subject to change at any time without notice.
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掛橋
Kakehashi
FEB 2011
Example Property on the Market
Kumamoto
Minami Sendanbata(南千反畑)
Pictured is a 9 storey 40 residential unit property with 11 parking spaces, located in Minami Sendanbata in
Kumamoto city. The property is located in a quiet residential area, however is also very close to the
Kumamoto city center.
Estimated returns are as follows:
• GOI: JPY 26,717,000
• NOI: JPY 18,722,000
• Asking price: JPY 280 million (6.7% NOI)
Access: 8 min walk to Fujisakimiyamae station
Disclaimer: The above information has been prepared with the assistance of JRAM – Japan Residential Assets Manager Limited. The
information herein has been obtained from sources we believe to be reliable. Such information has not been independently verified and we
make no representation or warranty as to its accuracy, completeness or correctness. Any opinions or estimates herein reflect the judgment of
KK Tenyu at the date of this publication and are subject to change at any time without notice.
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