Dalton to create Japanese distressed REIT fund

As Japanese REITs continue trading at an average 35 percent discount, the Japan and California-based firm says it is creating a $450m vehicle to acquire them. Dalton says it is looking to buy mid-sized REITs.

Dalton Investments, a California and Japan-based investment firm, said at the Reuters Japan investment summit in Tokyo Thursday that it is raising up to about $450 million that it would like use to invest in struggling Japanese real estate investment trusts.

Junichiro Sano, head of Dalton’s activities in Japan, said that overseas investors had already committed $300 million for the distressed REIT fund, and it is looking to raise another $150 million from Japanese investors, according to Reuters.

He said the firm will look to buy mid-sized REITs, avoiding the larger ones which may be overvalued.

On average, Japanese REITs are trading at a 35 percent discount to the value of property on their books, according to reports. Tokyo's REIT index has lost nearly half its value since it peaked last May, and several REIT listings have been cancelled since then.