Having pioneered the technique five years ago, property developer Tokyo Tatemono now uses a special purpose company on almost every new project.
Tokyo Tatemono Co created Japan's very first special purpose company following the country's debut SPC law of 1998, resulting in the landmark Takanawa Apartments 33 CMBS deal of June 1999. One of Japan's most dynamic property development and management companies, Tokyo Tatemono has never looked back since that pioneering deal.
These days, Tokyo Tatemono favours non-recourse or limited recourse funding, employing either of these for more than half of all the company's projects.
And Tokyo Tatemono is also one of the founders of the Japanese real estate investment trust (J-Reit) market ? it has already sponsored one of the 14 listed J-Reits in Japan (as of the end of September) and is considering a second.
Fumio Inada is deputy general manager in the investment management division at Tokyo Tatemono. ?We now employ some kind of SPC on virtually every new project we create these days, in order to keep the schemes separate from the company's balance sheet and to keep the assets and cashflows of each development entirely distinct from us as the creator,? he says.
Tokyo Tatemono develops, sells, leases and manages commercial buildings.
One of the most exciting and challenging projects the company has undertaken is the purchase of a prime building in Otemachi, once the head office of Fuji Bank and currently leased as one of the main Mizuho Bank offices. The roughly 40 year old building stands on one of the most valuable plots of land in one of Tokyo's smartest districts. Shinsei Bank funded roughly 60% of the ¥145bn project by a non-recourse loan, which was later refinanced in the public CMBS market.
The company floated the Japan Prime Realty Investment Corporation real estate investment trust on the Tokyo Stock Exchange in 2002, employing Merrill Lynch and Mizuho Securities as joint arrangers.
?Non-recourse and limited recourse funding through SPVs has become a vital element of our funding strategy in recent years,? says Inada. ?Securitisation allows our company to tackle far more projects than we could have before. It allows us to leverage our property development and management expertise, without having to worry about funding through our own balance sheet. We will use it more and more.?