The Perils of Japanese Property

Australian investors have been able to buy Japanese commercial property, via the ASX, since 2004. As the REIT bubble began to form, Babcock & Brown Japan hit the boards in April 2005. It was followed by Rubicon Japan in October 2006 and Galileo Japan in December of the same year. I’ve been intrigued ever since. All three sported distribution yields of 8-10%, high occupancy levels and interest coverage ratios of more than four times, implying conservative levels of debt by Australian standards. Commercial property in Japan yielded approximately 6% and the banks were willing to lend at interest rates...

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