About J-REITs

Number of J-REITs

Japan’s real estate investment trust (J-REIT) market was launched in September 2001, when two J-REITs publicly listed their investment units for the first time. The number of J-REITs increased steadily thereafter, reaching 42 by October 2007.

By April 2012, however, this number had fallen to 33; one J-REIT went bankrupt in October 2008, following the global financial crisis, and eight other J-REITs merged or were acquired by others.
Market prices eventually recovered, and the first new listing of a J-REIT since October 2007 took place in April 2012. Other J-REITs followed suit, and as of June 2014 a total of 46 J-REITs were operating. All J-REITs are listed on the Tokyo Stock Exchange.

Institutional Features

The only operating format permitted for J-REIT is an external management format, in which the investment corporation is run by an asset management company. This is because the law requires that an asset management company operate the investment corporation in which investments are made.

A J-REIT is essentially established by the shareholder (sponsor) of an asset management company. If the sponsor invests in various asset classes of real estate, it can establish multiple investment corporations that are operated by a single asset management company.
No real estate company has converted itself to an investment corporation, because there are no tax incentives that would make such conversions advantageous.

Requirements for Dividend Deductibility

To be exempt from paying corporate income tax during any given business year, a J-REIT must satisfy four main requirements:

(1) Its payout must exceed 90% of earnings available for dividends.
(2) Its largest shareholder must hold fewer than 50% of its investment units.
(3) Its largest shareholder must not hold more than 50% of the shares of another company.
(4) If it borrows funds, these must come from an institutional investor.


The primary asset classes of J-REIT investments include office, residential and commercial facilities. In addition to these, the share of logistics facilities has increased recently. Some J-REITs invest also in hotels, housing for the elderly and infrastructure facilities.

The categories of J-REIT in terms of investment focus include the focused type (investing in a specific asset class), the complex type (investing in two asset classes), and the diversified type (investing in multiple asset classes).
As of May 31, 2014, J-REITs had limited their investment area exclusively to Japan. Accordingly, J-REIT earnings have been denominated in yen. However, the law permits J-REITs to invest in properties located outside Japan, and one J-REIT announced its investment in a commercial facility located in Malaysia. As a result, in the future it is likely that additional J-REITs will invest in properties located outside of Japan.

Characteristics as an Investment Instrument

With one exception, J-REITs report their financial results on a semiannual basis. The fiscal periods of J-REITs differ, including, for example, January/July, February/August, March/September, April/October, May/November and June/December.

J-REITs are required to distribute more than 90% of their profits as a condition for dividend deductibility, but a majority of J-REITs have a payout ratio close to 100%. Only two J-REITs regularly use depreciation to fund dividends (that is, to make distributions in excess of profits).


Property Acquisition Price Rankings

(Billions of yen)

1 Shinjuku Mitsui Bldg. 170
3 Roppongi Hills Mori Tower 115
4 Shiodome Building 107
5 Tokyo Shiodome Building 83
Unit Price Growth Rankings
1 GLP J-REIT +1.60%
2 United Urban +0.93%
3 ORIX JREIT +0.83%
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