Goldman Sachs Group plans to expand its new private REIT to as much as ¥300 billion ($3.7 billion) to buy Japanese properties as the Wall Street bank foresees a turnaround in prices.
The bank’s asset management unit will begin the REIT in August with as much as ¥30 billion including equity and plans to increase the size to about ¥300 billion in five years, said Taro Squires, head of real estate investment management at Goldman Sachs Asset Management in Tokyo.
“We are close to the bottom of the real estate cycle,” said Mr. Squires in an interview. “I expect the market to bottom out within the next six to 12 months.”
The REIT, which targets a 4% to 5% dividend yield, will have a leverage of 50%, enabling it to buy as much as ¥30 billion of real estate at the start, Mr. Squires said. The company has a target to expand the REIT initially to ¥100 billion in two years, he said.
Goldman Sachs, the first non-Japanese company to start a private REIT, is looking to raise money from financial institutions and corporate pensions in Japan, Mr. Squires said.
Japan’s $3.36 trillion in pension money is the world’s second-largest retirement pool after the U.S., according to Towers Watson. Japan was the only market among 12 that had a drop in pension assets because of the poor returns on local stocks and bonds, according to the report.
Japanese pensions have 31% of investments in equities and 59% in bonds, with only 6% in alternative assets, according to Towers Watson. That compares with 25% in such assets in the U.S. and 23% in Australia, it said.