Our Market Opportunity—Industrial and Infrastructure Properties in Japan

We believe that a number of characteristics unique to industrial and infrastructure properties as well as developments in the Japanese economy present opportunities to generate attractive investment returns from the acquisition and operation of industrial and infrastructure properties in Japan. These characteristics and developments include:

1. Increasing demand for large-scale distribution centers.

Recently, the Japanese economy has been expanding, as indicated by the upward trends in the aggregate value of manufactured goods shipments, the aggregate amount of capital investment, and the mining and manufacturing indices. We believe that there is rising demand for more efficient distribution systems to meet the growing distribution needs of the thriving Japanese and Asian economies. Such trends have led to a recovery in the construction of new distribution facilities and an increase in the number and size of such facilities, resulting in abundant investment opportunities.

2. Increasing number of new manufacturing and research and development facilities.

Recently, there has been an increase in the number of new manufacturing and research and development facilities constructed in Japan, reflecting the overall trend in the Japanese manufacturing sector towards a re-examination of existing product lines and a repatriation of manufacturing facilities, particularly high-technology facilities, back to Japan.

3. The need to renovate existing facilities and the increased capital investment requirements for infrastructure facilities, especially in energy, environmental and communications-related fields.

As the Japanese economy continues to improve, there is a growing demand by companies operating in Japan, especially those involved in the newly developing energy, environmental or telecommunications sectors, for financing to make capital investments in new facilities and to renovate antiquated facilities constructed during Japan's high-growth period. 
See “Macroeconomic Indicators”.

4. Shifting attitude of management toward real estate assets.

Both the recent introduction of loss impairment accounting and the development of more efficient asset management capabilities in Japan are encouraging companies to outsource management of their real property holdings to professionals.

5. Shift of public sector assets to the private sector.

Recently, there has been a scaling back of national and local public sector investments. Furthermore, the national government has begun selling stateowned assets. See “Decline in Government Fiscal Investment and Loan Program”. New approaches to the provision of public services are also being adopted, such as PFI and the designated manager system, in which the public and private sectors share responsibility for the funding, development and management of important economic and social infrastructure assets. See “Decline in Government Fiscal Investment and Loan Program” and “Shift from Public Sector to Private Sector”. We recognize that trends such as these will continue, in which the public sector increasingly turns to the private sector for assistance in reassessing and reorganizing publicly-held infrastructure properties. We are confident that we can play an important role in this shift toward private financing and ownership of infrastructure facilities by acquiring and retaining infrastructure properties for investment purposes. Therefore, we intend to invest in these infrastructure properties held by the public sector after related laws or ordinances are amended to allow for such investment, if such amendment is necessary, and after necessary discussions with related parties.