Orix Jreit, the real estate trust set up by Orix Corp, fell by as much as 4.6% on its first day of trading on Wednesday, but the units had recovered to ¥508,000 by early afternoon yesterday (Thursday). Lead managers Daiwa SMBC and UBS Warburg priced the units at ¥520,000 to yield 6%. That price was at the top end of the indicated price range during what was the first global offering of a Japanese real estate investment trust (J-REIT).
The secondary market performance of the Orix deal shows that investors are seeking yields of above 6%. The thin trading volume on the first day - just 4% of the free float - demonstrates that there is relatively low volatility in property trusts, due to the almost fixed income nature of the paper.
Orix, Japan's largest leasing company, raised ¥51.3bn ($410m) from the sale of 98,700 shares in the trust, a figure scaled back from the 111,000 announced before the roadshow.
Orix Jreit was priced on an annual yield of 6% based on forecast earnings, while the purely domestic IPO that Mizuho and Merrill completed for Japan Prime Realty Investment Corp last week offered 6.6%. The 10 year government bond pays less than 1.5%.
Japan Prime Realty Investment Corp was priced at ¥200,000 per share. Its units begin trading on the TSE today (Friday).
Irrespective of the slightly disappointing performance of the Orix transaction, the latest two deals show that there is improving local and international demand for J-REITS, albeit at higher dividend yields than the early IPOs, which began last September.