In some cases, REITs have divested their Japanese properties. Mapletree Pan Asia Commercial Trust sold the TS Ikebukuro Building and ABAS Shin-Yokohama Building in 2025. CapitaLand Ascott Trust (CLAS) regularly divests its Japanese properties, saying that they are mature and have limited upside potential. In 2024, CLAS sold Hotel WBF Kitasemba East, Hotel WBF Kitasemba West, Hotel WBF Honmachi and Citadines Karasuma-Gojo Kyoto and Infini Garden above book value, and Citadines Shinjuku Central Tokyo in 2025 at 100% premium to book value. CLAS also regularly acquires Japanese assets. Some may argue this is to increase fees, but CLAS’s managers say that the trust divests assets that have reached their potential and needs to recycle those funds into higher-yielding properties.
Recently, an email from a reader cautioned that Japanese portfolios with leverage of almost 100% could pose a risk to S-REITs. This prompted a closer look at Japanese assets within locally listed REITs, sparking the question: Should we be worried about the high loan-to-value (LTV) ratios of Japanese assets?
REIT managers would say no, because they have buffers in place, including aggregate leverage well below the regulatory ceiling of 50%, interest coverage ratios of higher than the regulatory floor of 1.5 times, well-staggered debt maturity profiles, long weighted average lease to expiry (WALE), and sufficient credit risk guard rails and ring fences.
