What is a J-REIT?

A J-REIT, legally, a type of mutual fund, is a financial product with the objective of accumulating funds from a number of investors, investing such funds in real estate and distributing revenues derived from rents and capital gains from the sale of such real estate to the investors. Originating from the United States as “Real Estate Investment Trusts”, referred to as REITs, in Japan, by adding the initial “J”, they are known as J-REITs.

Structure of a J-REIT

Under the law, J-REITs are structured as a “real estate investment corporation” whereby “investment units” are issued instead of stocks as in the case of joint-stock corporations. Investors acquire and or sell the investment units of listed real estate investment corporations through brokerages.

Moreover, J-REITs can also receive loans from financial institutions, and issue “investment corporation bonds” which are the equivalent of bonds with joint-stock corporations.

J-REITs are required to outsource asset management and asset custody functions to external professionals and we have been entrusted with the asset management responsibilities, acting as Nippon Prologis REIT Inc.'s asset management company.

Lastly, by distributing at least 90% of its taxable income to unit holders in the form of dividends, in addition to satisfying certain other requirements, investment corporations are exempt from paying corporate taxes. Consequently, compared to the average shareholder of other joint-stock corporation, higher dividends can be expected.